The Federal Reserve just lowered interest rates. How does this impact business credit

A Fed cut is like a green light for your business credit file—costs drop immediately, approval odds rise, and the path to “bankable” status shortens. Here’s the play-by-play happening right now:

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1. Cheaper cost of capital – starts in ~30 days

• 80 % of SBA 7(a) loans are variable-rate; the 25 bp cut flows through on the next billing cycle, lowering payments ~$75 per month per $100 k outstanding .
• Business lines of credit (also pegged to Prime) reset within one statement period – instant cash-flow relief you can sweep into inventory or marketing instead of interest .

2. Higher approval odds – banks say “yes” more often

• Lower monthly debt-service improves your DSCR; same revenue now supports ~3-5 % larger loan without extra paperwork .
• Risk-adjusted return looks better to underwriters, so decline rates fall – especially helpful for start-ups < 2 yrs that normally get “no” 75 % of the time.

3. Refi window opens – dump expensive debt

• Refinance 2023-24 MCA or online loans (18-35 % APR) into bank term loan or LOC at 8-10 %; lifetime savings on a $250 k balance can exceed $60 k .
• Equipment finance rates drop too; Section 179 + bonus depreciation still intact → tax write-off + cheaper debt = double leverage.

4. Credit-building accelerates

• Use the interest savings to pay Net-30 vendors early; every “paid faster than terms” report boosts PAYDEX 2-4 points.
• Lower utilization on variable-rate business credit cards (also reset next cycle) keeps personal FICO < 30 %, unlocking PG waivers faster.

5. Consumer tail-wind = your collateral

• Rate cut → cheaper mortgages & car loans → more disposable income; retail & service SMBs typically see 3-5 % revenue lift within a quarter .
• Higher top-line feeds straight into larger credit-line offers – banks auto-refresh limits when cash-flow trends up for 90 days.

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Action checklist (next 30 days)

1. Pull 3-month bank statements → apply for larger LOC while DSCR looks better on paper.
2. Request rate-reset letter from existing variable-rate lender – no refinance fee required.
3. Refinance any balance > 12 % APR into SBA 7(a) or equipment loan < 9 %.
4. Redirect monthly savings into early vendor payments → PAYDEX 80+ by Q1-2026.

Bottom line: every 25 bp Fed cut is worth ~$250/yr per $100 k of debt you move to Prime-based paper – but the real prize is the larger approval, faster bankability, and bigger war-chest you lock in before the next rate cycle turns.