Real estate-minded Colorado entrepreneurs, company owners and investors know that the current business environment is active and churning with possibilities. Regular readers of our blog at O'Brien Legal Services LLC in Denver certainly know that, given several of our entries that have recently underscored the Colorado commercial market's dynamism (please see our September 7 post, for example).
The country's broad-based economic growth over the past couple years obviously buoys financial regulators, yet concerns them a bit as well. As a recent business piece notes, "When the economy booms, it runs the risk of inflation."
To counter that, federal officials have recommenced the practice of periodically raising interest rates on borrowing, a practice they steered clear of during the country's long recession. A rising-rate environment acts as a braking mechanism on overly hot growth and an attendant spiraling of prices.
The effect of rising rates is especially notable with adjustable-rate financing. A commercial borrower can be periodically revisited with a rate spike, unlike the case for an entrepreneur or company principal who has secured a fixed-rate loan relevant to an investment.
Is that overly concerning?
The aforementioned business report notes the conventional mindset favoring fixed-rate loan products during a time when successive rate jumps are expected.
A commentator in that piece also points out, though, that rising rates are imposed only when the economy is broadly flourishing. Put another way: It might be a sound business move for a real estate investor to take out an adjustable-rate loan over a short term during which profits might reasonably exceed expenditures incurred through an upward rate tick.
Financing for commercial real estate investors is obviously a core concern that needs to be timely and fully evaluated. A great number of options and funding sources exist, and a proven real estate attorney can help a client fully investigate and optimally act upon them.