Tuesday, July 25, 2006

CFO Magazine – Inflation and Interest Rate Worries

If you’re a business owner or chief financial officer of a small or mid-sized business, no doubt concerns of inflation and interest rate increases have crossed your mind these last few months as the Fed continues to raise the benchmark interest rates that determine a company’s cost of obtaining bank loans and other forms of capital.

In the July 2006 edition of CFO Magazine, Joseph McCafferty notes that CFOs are worried that interest-rate increases could choke current economic growth.

In the article, John Graham, a finance professor at Duke's Fuqua School of Business states that "CFOs are telling us that their companies can ride it out for now, but that we are a couple of steps closer to the danger zone for the U.S. economy".

Further noted is that a top concern related to the increase of interest rates is the possibility of rising salaries and wages.

Now is a good time to make sure your bank is up to speed on not only your recent successes, but also any challenges that you’re facing and how you’re dealing with those challenges. A regular flow of communication with your banker will be a great advantage if the economy incurs a downturn and your business suffers. The more your banker understands your business and its challenges, the more likely you’ll get extra help should cash flow experience a bit of strain.

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