Funding the Best Growth Path

Funding the Best Growth Path

Published in CFO

For finance executives, the binge on borrowing may be nearing its end. And they know it.

In recent years, as interest rates drifted to record lows, companies craving liquidity didn’t have to look far. The low cost of debt, as benchmarked against historical standards, and the easing of lending standards meant stable companies with sturdy banking relationships could leverage that rapport into cheap loans.

What’s changing? As it turns out, both sides of the equation are recalculating their positions. On the banking side, the Federal Reserve’s more-cautious-than-expected approach toward raising rates has tightened margins even as post-downturn reforms require financial institutions to hold more capital against loans. More recently, troubles in the massive energy sector have added to banks’ skittishness, drilling the fear of loan defaults into them.

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