THE FED JUST RAISED RATES. HERE IS WHAT BUSINESS OWNERS SHOULD DO NEXT.
On September 16, the Federal Reserve raised its target interest-rate range by 0.25 percentage points, to 3.75%–4.00%. Major banks subsequently increased their prime lending rate from 6.75% to 7.00%.
For business owners, real estate operators, and nonprofit executives, this is more than an economic headline. It can directly affect interest expense, cash flow, forecasting, capital projects, and the financial information used to make decisions.
THE ACCOUNTING IMPACT
Companies with variable-rate loans, lines of credit, credit-card balances, or other floating-rate obligations should expect higher interest expense.
The effect may not appear immediately in every financial statement. It depends on the loan’s reset date, benchmark rate, spread, average outstanding balance, and contractual terms. That is why the accounting team should update the debt schedule instead of applying a general percentage increase across every loan.
Accrued interest calculations should also be reviewed during the month-end close. If a rate changes in the middle of an accounting period, the accrual may need to reflect different rates for different portions of the month.
Real estate and development companies should evaluate whether higher interest costs are immediately expensed or qualify for capitalization as part of an active development project. The accounting treatment depends on how the borrowed funds are being used and whether the project meets the applicable capitalization requirements.
Businesses should also review loan covenants. Higher interest expense can reduce net income, debt-service coverage ratios, fixed-charge coverage ratios, and other performance measures—even when revenue and operating performance remain relatively stable.
THE CFO IMPACT
A rate increase should trigger a forecast update, not simply an accounting entry.
Management should model the effect on cash flow under multiple scenarios. What happens if rates remain at their new level? What happens if another increase follows? How much additional cash will be required during the next 12 months?
For real estate owners, the analysis should include property-level debt service, refinancing assumptions, lender requirements, distributions, capital expenditures, and projected debt yields or coverage ratios.
For operating businesses, the forecast should consider working-capital needs, customer collection timing, vendor payment terms, hiring plans, planned investments, and the availability and cost of revolving credit.
A rolling 13-week cash-flow forecast can be particularly useful when liquidity is tight. It connects expected receipts and payments to actual bank activity and gives management time to address a potential cash shortfall before it becomes an emergency.
This is also an appropriate time to ask whether excess cash should be used to reduce variable-rate debt, maintained as a liquidity reserve, or deployed elsewhere. That decision should be based on expected returns, taxes, liquidity needs, loan restrictions, and the company’s tolerance for risk.
WHAT I DO
Through SoFla Prime Consulting and Ultramar Financial, I help businesses, real estate organizations, and nonprofits turn their accounting records into useful financial information.
My work includes month-end close, financial reporting, budgeting and forecasting, cash-flow modeling, outsourced controller and CFO support, real estate underwriting, lease analysis, development and property accounting, audit preparation, and financial-process improvement.
The objective is not merely to record what happened last month. It is to help management understand what is happening now, what is likely to happen next, and what decisions should be made before a financial issue becomes a crisis.
If your organization has growing reporting demands, unreliable forecasts, limited visibility into cash flow, or financial questions that extend beyond routine bookkeeping, outsourced controller or CFO support may provide the additional structure and analysis you need.
SOURCES
Federal Reserve — Implementation Note, September 16, 2026
Reuters — U.S. Banks Raise Prime Rate After Fed Decision
Comments