SA’s Interest Rate Hike: How Small Businesses Can Thrive

Interest Rate Hike

No-one knows the challenges faced by a small business in South Africa better than us – and the recent interest rate hike has dealt yet another blow to SMMEs throughout our country. But with the right planning, advice and resources, this recent obstacle can be easily overcome, just like you’ve found ways to keep the lights on during loadshedding.

If you’re worried about the impact this might have on your small business, read on to find out how you can deal with the downsides of the Reserve Bank’s interest rate hike.


The reality: The interest rate hike & your small business


Things will get expensive for consumers with the interest rate hike

Put simply, the interest rate hike means that things have gotten more expensive. Starting with the banks, the expense is passed right through the entire supply chain to the consumer, with each step seeing minor increases that culminate in significantly more expensive products and services, like a snowball gaining size as it rolls downhill.

This means that consumers will be unable to purchase the same quantities as before, or will be forced to carefully choose where they spend their money.

And just like loadshedding over the last couple years, it gets worse.

Consumers who are in debt – which is a large majority of our country – will see increased payback rates as a result of the higher interest rates, placing further strain on their spending ability. So if your company depends on people giving you money, which we’re going to be bold and assume it does, there’ll be less to go around and your profits are sure to take a knock.



There will be an inevitable dip in the market

It’s a simple equation: Less money + higher costs = less spending. While companies and consumers alike find their footing after the hike, the market is sure to contract, albeit (hopefully) briefly due to the interest rate hike.



Cash-strapped employees will demand a raise as they suffer the effects of the interest rate hike

When things get more expensive due to the interest rate hike, your employees are likely to want a raise to cover their rising cost of living – and if we’re being honest, given how hard most employees have worked to counteract the effects of the pandemic, they deserve it. But with consumers spending less and your small business seeing less profits as a result, this request couldn’t come at a worse time. 

Small businesses who are unable to match employee demands may see a talent drain, with crucial employees leaving for more competitive pay. As a small business owner, you probably already know how expensive employee turnover can be, what with the time expended into finding the right candidates, giving them the proper training, and keeping your company afloat while they learn the ropes.



Inventory & materials costs will rise

As we said, no part of the value chain is spared from the spreading darkness of the interest rate hike. If your small business is a retail store, inventory is going to be more expensive, and if you’re a manufacturer, materials costs will rise. Logistics supply chains are not exempt from the interest rate hike either, so transport costs are also going to spike – and if you’re an import/export company, this will have a serious impact on your small business.

Naturally this will force you to raise the price of your own products, despite consumers having less cash than before.



Borrowing funds for your small business will come at a higher cost with an interest rate hike

Another consideration is your own debt, or your company’s ability to take on debt when required. Traditional lenders such as banks will be forced to raise their interest rates, which can leave you in a bit of a rock-and-hard-place scenario. You might get the funds you need, but the repayments could leave you in a worse position than the one you were trying to get out of. Plus, getting funding from banks can take a seriously long time, and the capital might arrive too late.



The solution: How to survive the interest rate hike as a small business


Keep prices as low as possible

Okay, we know this entire article until now has been telling you how impossible this is, but it’s a foolproof way of retaining your small business’s customers despite the interest rate hike – and this should be your key focus until the storm blows over.

Your customers will deeply appreciate your dedication to keeping prices low, so consider what profit margins you’re able to sacrifice to attract and retain new and existing customers, as well as what prices you can increase or what products you can upsell to improve your bottom line.

However, none of this changes the facts: You’re likely to be cash-strapped yourself, and keeping prices low while expenses rise may put you in the red. In the long-term, this is more than worth it, as once a customer leaves, it’s extremely hard to get them back. Another point to consider is that, while the market dips, you’ll still be making sales – albeit at a lower profit than before. This should help see your small business through the interest rate hike doldrums a little more easily. 

And luckily for you, the solution is simple: find an alternative funding partner who can help you invest in your business with seriously fast funding that’s tailored to your specific business needs. At GroWise Capital, we work with you to find the ideal funding solution for your small business, investing in your future success with up to R3 million in funding in just 24 hours.



Give your employees a raise to combat the interest rate hike before they leave your small business

As we mentioned, replacing employees with equal talent is a costly affair, so it’s more than worth it to look after your people before they move on to greener pastures. To keep your small business running smoothly during the coming months, be open and honest with your employees. Transparency is a great way to encourage a loyal and dedicated workforce, and open conversations – even if they’re difficult – are always beneficial for both your employees and your company.

Once you’ve opened up, give your employees a raise or offer financial incentives to help them survive the interest rate hike before they start seeking other opportunities. This will save you time and money, as a drop in productivity will only compound the issues your small business faces because of the interest rate hike.

Our team of underwriters and small business experts are ready to help you cover the immediate costs of financial incentives for your employees today, so you can boost your bottom line tomorrow. If this is an option you’d like to explore, get in touch with us today and get the funds you need in as little as 45 minutes.



Get fast funding to purchase your inventory or materials

Another financial investment to ensure the future success of your business? You betcha. At GroWise Capital, we specialise in merchant stock advances, buying your stock and selling it to you with easy and flexible repayments to suit your business. This allows you to get the inventory, stock or materials you need to continue running your business – and, therefore, making money.

Click here to find out more about our merchant stock advance offering and apply now to ensure your small business remains afloat during the interest rate hike fallout.



Look to alternative funding models to avoid paying higher interest rates

The banks may have raised their interest rates for business funding, but we haven’t. The GroWise Capital team is deeply passionate about helping small businesses survive, and we know that you need accessible funding now more than ever. The only way the interest rate hike has affected how we do things is this: We are now even more dedicated to getting local small businesses the funds they need to stay operational and profitable, now and well into the future. 

Not only are our models exceptionally flexible, taking your business’s unique attributes into account for tailor-made repayment structures, we pride ourselves on being fast – seriously fast. From the minute you apply, we can get you up to R3 million in funding within 24 hours, and sometimes as quickly as 45 minutes.

Browse our funding solutions now and get in touch with us today to get the funds your small business needs to survive the interest rate hike, so you can keep your employees, your customer and your company’s bank balance happy. 

Interest Rate Hikes & How to Survive It
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