When it comes to borrowing, interest rates can feel like the sole deciding factor. And for business owners weighing an equipment purchase, expansion, or new location, the past few years of rising rates may seem like a flashing caution sign.
It’s an understandable perspective. After more than a decade of historically low borrowing costs, including rates that hovered near zero, many entrepreneurs have grown accustomed to uncharacteristically cheap capital. But taking a broader look tells a different story.
In a zoomed out, historical context, today’s interest rates are still relatively modest. And for businesses with healthy margins, strong strategy, and local banking relationships, waiting on a “perfect” rate could mean missing key opportunities for growth.
Rates in perspective: a look back
In the early 1980s, the U.S. Federal Reserve pushed interest rates into the double digits to tame runaway inflation. Prime lending rates peaked above 20% in 1981 – a level that seems unimaginable today. Borrowing money to buy a home or invest in a business meant shouldering steep monthly payments and leaner operating models.
Even in the 1990s and early 2000s, decades that were associated with strong economic expansion, average mortgage and business loan rates routinely sat between 7-10%. While business owners likely weren’t thrilled to pay these rates, they were standard at the time.
Why rates feel much higher than they historically are
So why does this rate environment feel so different? Part of the reason is our recent rate evironment – for much of the 2010s, interest rates were held artificially low in response to the Great Recession, with the goal of spurning an economic recovery. Borrowers became used to historically abnormal borrowing conditions, which has influenced the lens in which the current rates are viewed.
Now, as the Federal Reserve adjusts rates to balance inflation and economic growth, that adjustment feels dramatic. But in truth, today’s rates are closer to long-term averages than anything we’ve seen in decades.
What business owners should take from this
If you’re a business owner considering financing, the key takeaway is this: today’s interest rates are not a reason to stall growth. Rates are just one piece of the puzzle. What you need to ask yourself is:
Financial institutions – especially community banks – are still actively lending. And SBA-backed loans remain an attractive option, with longer terms, competitive rates, and built-in safeguards that allow for manageable monthly payments even in higher rate environments.
Waiting for rates to fall may feel safer – but like any market timing, it’s a gamble. If inflation remains stagnant or new global economic pressures emerge, rates could fluctuate. Meanwhile, costs for materials, labor, or leasing may rise in the meantime, offsetting any potential savings in the event that rates did drop.
A mindset shift for strategic growth
The most resilient business owners see today’s environment not as a roadblock, but as an opportunity to invest wisely. Higher interest rates encourage sharper planning, stronger cash flow management, and more intentional growth.
Instead of pausing growth to wait for rates to return to “normal”, it’s worth considering that we may already be there. The question isn’t whether you can afford to borrow – it’s whether you can afford to wait.
Minnwest Bank is here for you
At Minnwest Bank, we believe that finding the right banker is crucial for small-business success. Minnwest is a local lender that can offer the same caliber of loans and cash management services you’d find at large national banks, but with personalized services and customized lending. Minnwest Bank lenders are able to tailor loans to the borrower’s needs and circumstances. Credit decisions are made locally by individuals that live and work in your community.
Connect with one of our many helpful Commercial Lenders at Minnwest Bank. We live here too, which is why we're invested in your success. From business checking accounts to cash management tools designed to streamline and protect your payments, Minnwest Bank has everything needed to run your business smoothly.