Small businesses are feeling the pinch of higher costs and interest rates. Variable-rate loans are a common way for small and medium-sized business owners to finance their operations. However, these owners face increasing borrowing costs due to the recent Fed rate hikes, with the Small Business Administration loan rate set to reach 10%, the highest it has been in 15 years. This, combined with rising wages and supply costs, has put small businesses in a difficult situation.

Higher borrowing costs impact everything, from monthly expenses to customer payments, and hurt the economy as a whole. Despite this, business owners can take measures to minimize the damage before it becomes too late. Here are some steps owners can take to save their businesses:

Improve accounts receivables: As customers struggle to make payments, businesses should consider offering a discount of 3% if payments are made within 15 days. Additionally, business owners can consult their bankers for advice on products and services that can streamline collections.

Use credit cards to your advantage: Business owners can use credit cards to purchase materials and pay for monthly expenses, thus extending their cash flow cycle by 30 days. Credit cards also offer rewards programs that put cash in your pocket at the end of the year, making them a cheaper option than drawing from a line of credit, provided payments are made on time.

Raise prices: Business owners should not be afraid to raise prices if their costs have risen by double digits. Customers are aware of the current economic climate and understand that prices are rising across the board. It is essential to communicate with them and ensure that prices are in line with the competition.

Study your competitors: Business owners should study their competition to determine what they are doing differently. This can provide insights into new ideas, products, or services that can help drive revenue or lower employee attrition costs. Competitors can also offer cautionary warnings of what to avoid.

In conclusion, small businesses can take proactive measures to minimize the impact of rising costs and interest rates. These steps include improving accounts receivables, using credit cards to extend the cash flow cycle, raising prices, and studying competitors. By taking these measures, small businesses can survive and even thrive in today’s challenging economic climate.