Interest Rate Futures for Businesses

Maintain profitable operations amidst rising rates

Corporations typically fund their operations through a combination of equity and debt. Debt includes borrowing directly from banks or other lending sources and borrowing directly from investors by issuing securities.

Businesses often forecast their funding needs well in advance of the actual date they need the funds, as a matter of prudent cash flow budgeting. If a corporation decides to use debt financing to provide some or all of this funding, it is at risk if the interest rate on the debt has increased by the time the funding is required. Any increase in interest rates will increase the corporation’s interest expense and may cause potentially profitable operations to become marginal or unprofitable.

If the company decides to issue floating rate debt, the total amount of interest it will pay over the life of the debt is unknown, since the interest rate for each future re-set period is unknown. If rates rise, so will their interest payments.

The Burak Hannon Brojde Group has expertise in helping small, medium, and large-size corporations maintain profitable operations by devising strategies that hedge against the risk of rising interest rates.