For months, many business owners and commercial real estate investors have operated under the same assumption:
If they wait long enough, interest rates will come down and financing will become easier.
That assumption now deserves another look.
A new survey of 104 economists found unanimous agreement that the Federal Reserve will maintain its 3.50%–3.75% target range at its July 28–29 meeting. Seventy-eight respondents also expect no change through the end of 2026. More importantly, among economists who expect a change this year, most now anticipate an increase—not a reduction. Reuters reported that 66% of respondents answering a separate question described the probability of a 2026 rate increase as high.
That does not mean a rate increase is guaranteed. It means borrowers should stop building important business decisions around the expectation of near-term relief.
The market’s rate-cut story has changed
Until recently, the central debate was over when the Federal Reserve would begin reducing rates.
Now the conversation is shifting toward how long rates will remain elevated—and whether persistent inflation could force another increase.
Oil prices have risen approximately 25% in recent weeks as renewed Middle East hostilities threaten energy supplies. Inflation is still running at roughly twice the Federal Reserve’s 2% objective, while the Fed’s preferred Personal Consumption Expenditures measure was reportedly 4.1% in May.
That combination creates a difficult policy environment.
Lowering rates could stimulate investment and economic activity, but it could also reinforce inflation. Raising rates could help contain prices, but it would put additional pressure on businesses, consumers and interest-sensitive assets.
The most likely result, according to the current economist consensus, is an extended hold.
For borrowers, a rate that remains unchanged is not the same as a financing environment that remains unchanged. Treasury yields, credit spreads, collateral values and lender risk requirements can all move even while the federal-funds target stays in place.
Today’s benchmarks already demand stronger transactions
The Federal Reserve’s July 20 interest-rate release showed the bank prime rate at 6.75%. The 10-year Treasury yield closed July 17 at 4.55%, while the 30-year yield stood at 5.06%. Federal Reserve H.15 data provides the official daily benchmark figures.
These rates influence the pricing of business credit, commercial mortgages, bridge financing and other capital structures.
But the effect is not limited to the interest rate shown on a term sheet.
Higher benchmark rates can also affect:
- Maximum loan proceeds
- Required debt-service coverage
- Property valuations and capitalization rates
- Borrower liquidity requirements
- Interest and operating reserves
- Refinancing feasibility
- Investor return expectations
- Lender appetite for transitional assets
A transaction that appeared financeable under a lower-rate assumption may require more equity, stronger cash flow or a different structure today.
The cost of waiting can exceed the cost of capital
It is understandable that borrowers want the lowest possible rate.
The concern is that waiting for a perfect rate can create a larger financial loss.
A manufacturer may delay purchasing equipment that would increase production. A contractor may turn away profitable work because payroll and material expenses arrive before customer payments. A real estate owner may postpone refinancing while the existing loan approaches maturity. A developer may wait while construction and carrying costs continue to accumulate.
In each case, the headline interest rate is only part of the decision.
The proper comparison is:
What does the financing cost—and what does the delay cost?
That second number should include lost revenue, missed contracts, penalties, expiring purchase opportunities, rising construction expenses and the risk that future underwriting becomes more restrictive.
Capital is expensive when it is poorly structured. Delay can be even more expensive when it causes a viable opportunity to disappear.
Commercial real estate borrowers should model the deal—not the forecast
Commercial property owners face an especially important decision.
Approximately $875 billion of the $5 trillion in outstanding commercial mortgages is scheduled to mature during 2026, according to the Mortgage Bankers Association’s commercial and multifamily research. Some borrowers will refinance into a higher-cost environment than the one in which their original debt was issued.
A sponsor cannot control the Federal Reserve. The sponsor can control how early the refinancing process begins and how well the property is prepared.
A sound refinance analysis should examine:
- Current net operating income
- Sustainable—not aspirational—rents
- Updated operating expenses
- Realistic property value
- Existing loan balance and maturity date
- Required interest or operating reserves
- Debt-service coverage at multiple rates
- Maximum supportable leverage
- Additional collateral or equity options
- Backup bridge or private-credit execution
The most useful underwriting model should include a base case, downside case and severe-stress case.
If the transaction only works after an assumed rate cut, it does not yet have a reliable financing plan.
Businesses need to understand their cash-conversion cycle
For operating companies, the rate outlook makes liquidity management more important.
A profitable business can still run short of cash when payroll, fuel, materials or inventory must be paid before customers settle their invoices.
Management should know:
- The average number of days required to collect invoices
- Which customers consistently pay late
- How much cash is tied up in receivables
- Whether revenue growth is increasing the working-capital requirement
- How seasonal expenses affect liquidity
- Whether borrowing costs can be passed through in pricing
- What happens if customers take 15 additional days to pay
If the core problem is delayed receivables, a conventional term loan may not always be the most efficient answer.
Invoice factoring or accounts-receivable financing may better align available capital with sales. Asset-based lending may support a company with eligible receivables, inventory or equipment. A revolving facility may be more appropriate than fixed debt when funding needs fluctuate.
The structure should follow the cash-flow problem.
Investors and family offices should expect greater demand for flexible capital
An extended higher-rate environment can create opportunities for private-credit investors and family offices.
Bank-regulated capital may remain selective, particularly for complex transactions, transitional properties and borrowers whose needs do not fit standardized programs. Private capital can provide speed, structural flexibility and certainty where conventional financing is not available.
However, higher rates also increase risk.
Investors should evaluate whether a borrower can service the obligation without relying on an immediate refinance. They should examine collateral coverage, operating margins, covenant protections and the repayment plan under stressed conditions.
The strongest private-credit opportunity is not necessarily the one offering the highest coupon.
It is the one where the return is supported by disciplined underwriting, documented collateral and multiple repayment paths.
The Apex perspective: finance the objective, not the prediction
At Apex Commercial Funding, we do not believe borrowers should rush into unsuitable financing because rates may remain elevated.
We also do not believe businesses should suspend sound opportunities while waiting for a rate environment no one can guarantee.
The better approach is to define the commercial objective first:
- Is the company financing growth?
- Bridging slow customer payments?
- Acquiring an income-producing property?
- Completing a construction project?
- Replacing maturing debt?
- Preserving liquidity during a transition?
Once the objective is clear, the appropriate capital structure can be evaluated across cost, speed, repayment flexibility, collateral requirements and exit risk.
The goal is not simply to find money.
The goal is to secure capital that advances the business or investment without creating a larger problem later.
Build a financing plan that works under current conditions
Rate forecasts will continue to change. Your capital plan should not depend on every forecast being correct.
If your company, commercial property or acquisition requires financing during the next 6 to 12 months, now is the time to review the numbers, identify potential weaknesses and compare available structures.
Contact James Fillmore II at James@apexcommercialfunding.com or 240-535-9291 to discuss your transaction confidentially.
Financing is subject to underwriting, due diligence, lender requirements and final approval. This article is for informational purposes and does not constitute an offer of credit, legal advice or investment advice.
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