Getting Ahead: Rate Cuts & Deals

Transcript

Matt Staninger: Hello and welcome to this special edition of OnPoint by Oak Street Funding. Today we will be discussing the current federal funds rate environment and the importance of making an acquisition deal. The fed announced its first rate cut of 2025 a few weeks ago, and more cuts are expected to follow in the upcoming months. It’s critical to start the work now before more buyers enter as rates continue to decrease. I’m Matt Staninger, Market Research Analyst at Oak Street Funding, and joining me today is Alex Weaver, Vice President of Strategic Markets at Oak Street Funding. Alex, thanks for joining me today.

Alex Weaver: Thanks for having me Matt.

Matt Staninger: To start, why is now such an important time for RIAs, CPAs, and insurance agency owners to start considering acquisitions as rates begin to fall?

Alex Weaver: It’s so important for businesses to begin considering acquisitions now because as rates drop competition is going to increase as money for financing gets more affordable.

Matt Staninger: How do purchase prices and monthly payments shift when interest rates drop, and what impact does that have on affordability?

Alex Weaver: Typically, when rates drop purchase prices will go up because there is a greater level of competition. So, although you may be getting a lower interest rate on your loan it typically evens out because you are having to pay a higher purchase price. That’s why it makes sense to buy while the purchase prices are still low and get the benefit of the lower rate on the lower purchase price down the road.

Matt Staninger: What risks do buyers face if they wait until rates fall further and more competition enters the market?

Alex Weaver: In many cases they risk getting priced out of the market. As money becomes cheaper to borrow many other businesses may have a higher risk tolerance than you do, especially if they’re much larger and are willing to pay a higher multiple than you want to pay.

Matt Staninger: Based on current projections, what do you expect to see with interest rates for the rest of the year and into Q1?

Alex Weaver: Based on the projections from the Fed meeting last week in Mid-September we are anticipating 1-2 more rate cuts for the remainder of 2025 and potentially 2 more cuts in 2026. So, we should see significant movement by this time next year if projections hold true.

Matt Staninger: What steps should businesses be taking today to prepare for an acquisition in this changing rate environment?

Alex Weaver: Typically, the best advice for the short term would be three-fold. First, would be to identify what your goals are and analyze your balance sheet to see what you want to clean up financially and make sure you’re set up systems wise for an integration. Next, you want to make sure you have your lender relationship in order. Finally, look through your network to see who you think would be good to reconnect with as someone who might have an interest in selling or merging in the coming years.

Matt Staninger: Besides acquisitions, what else can businesses do to prepare for a lower rate environment than today?

Alex Weaver: Another couple things many businesses should consider if acquisitions aren’t their priority are organic growth initiatives and debt consolidation. Lower rates also mean easier access to working capital for things like marketing initiatives, hiring needs, and cleaning up expensive debt on your balance sheet that you may have accrued in the past few years in a higher rate environment.

Matt Staninger: Thank you, Alex, for being here and sharing your insights…

Alex Weaver: Visit us at OakStreetFunding.com or call us directly at (866) 625-3863 to start a conversation. Let us help you navigate the evolving lending environment and secure the capital you need to thrive. Thanks for joining us on OnPoint!