Interest Rates

February 22, 2024

by a searcher in Leeds, UK

Hi All

So what are your thoughts on lending now and getting in whilst rates are still high, you have a chance at better asset prices but higher interest rates.

If you wait for interest rates to drop the asset prices go up so I think it is a question worth considering.

I personally think better to get in now, any thoughts?

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Interesting thought. I would say despite higher interest rates we really have not seen prices for businesses drop that much. I think more creative ways are being used to get deals done like with more seller notes, seller roll-over equity, and seller notes on standby, but I would not say we have seen a large dip in prices. But in theory if you buy a business today and the cash flow works at today's interest rates, and interest rates go down in the future, you should generate more excess cash flow and the business should be stronger. But in theory the cash flow being generated by the business does not change. The only thing that changes is your debt service is lower. Market multiples have more to do with cash flow than interest rates.

Reply by a searcher
from University of Southern California in Mid-Atlantic, USA

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