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5 Strategies Small Businesses Can Use to Respond to Cash Rate Changes

Changes in the cash rate can influence your business operations and financial planning for the long term. Discover how you can navigate these changes for better business profitability.


When we speak of the cash rate, we’re talking about the interest rate that banks charge each other. 

This rate is set by the Reserve Bank of Australia (RBA), so it can influence the economy in big ways. For instance, it affects how much it costs for the banks’ customers, including small businesses, to borrow or earn interest on their savings. 

For small businesses, changes in the cash rate can affect everything in their operations—from the day-to-day costs of running a business to planning for the future. Not to mention it can impact a business owner’s ability to secure loans or the profit they make from their savings. 

So, even the small change in the cash rate can have a monumental impact on a business.

This may sound scary, but don’t fret.

In this article, we feature five clear, actionable strategies to help you navigate the effects of cash rate changes. This way, your business can stand the test of time.


The Five Strategies

Strategy #1: Have Flexible Financial Planning

Think of flexible financial planning as your business’s navigation system. With it, you can adjust your course as economic conditions change—including cash rate changes.

One of the most fundamental ways to plan for financial flexibility is to do regular check-ins on your finances. This way, you can easily tweak your budget and goals as needed. 

For instance, when interest rates dip, try and secure those lower rates for the long haul. You can also jump on expansion plans. But when rates start rising, focus on paying down debt and trimming unnecessary costs.

Don’t forget to set up a safety net, too. A contingency fund is key here, as it will allow you to face higher interest rates without pinching pennies.

With a flexible approach to financial planning, you ensure you’re staying two steps ahead. And you give your business a greater chance to survive and thrive no matter the economic weather. 


Strategy #2: Diversify Your Sources of Financing

As they say, don’t put your eggs in one basket.

Financial diversity opens you to a world of opportunities. In particular, multiple sources of finances can give you a steady cash flow regardless of the economic changes that affect cash rates.

But how can you have a diverse source of funds?

Start by checking out the grants and subsidies designed for small businesses. They often include extra perks for business owners and expert guidance alongside the funding. 

Crowdfunding is another way to rally your community’s support. Here, you turn your customers into your financial backer. Aside from getting funding, you build a strong bond with them as you grow your business. Also look into investors who are eager to invest their money.

Don’t forget to broaden your relationships with banks, too. This way, you’ll have different options for financing from banks. Having options means you can always find the best deal for your business’s financial needs.

Remember, the wider your financial network, the more support you’ll have. Especially when there are cash rate changes that massively impact your business.


Strategy #3: Optimise Debt Management

When cash rates shift, the cost of your debt can change, too. And this can affect how much you’ll need to pay back. 

Managing debt is all about having a solid grip on your finances. It’s all about ensuring that you can navigate any financial situation your business faces, such as cash rate changes.

For optimised debt management, start by reviewing all your current debts. Identify which ones cost you the most in interest. Focus on paying off the most expensive debts when rates start rising. And when rates are low, it might be the perfect time to refinance high-interest loans.

Also, paying more than the minimum required on your loans can help cut down the interest you pay over time. It will also free up more cash for you to use elsewhere in your business. 

Don’t forget to track your credit score, too. A healthier credit score can unlock better cash rates and terms, which can go a long way in your business.

Debt management is all about strategic planning and making your debts work for you, not against you.


Strategy #4: Build a Cash Reserve

Think of building a cash reserve as setting up a financial safety net for your small business. One that gives you a financial cushion to absorb shocks without getting external funding. Especially when there are changes in the cash rates.

This is all about being prepared for the unexpected..

To build your business’s cash reserve, begin by setting aside a small, manageable part of your monthly profits. Treat it as a non-negotiable expense; a way to protect your business for rainy days ahead. 

You can also look into automation to make it easier to grow your cash reserves. Set it up so your bank, for instance, will automatically transfer a set amount of money from your business account to the savings account for your cash reserves.

Additionally, reassess your budget.  Find opportunities to trim expenses and redirect what you save into your cash reserve. Remember, those small savings can add up over time and add up to your financial buffer. 

Having a cash reserve is about ensuring your business’s resilience no matter the economic climate and cash rate changes.


Strategy #5: Ensure Cost Control and Efficiency

This is all about making every dollar work for your business. Keeping your costs under control and boosting business efficiency ensures a good financial state even when changes in the cash rate threaten business profitability.

But how do you make it happen?

Start by doing a thorough review of your current expenses. Look for any areas in your business where you can cut back on costs without compromising quality or productivity. 

Also consider embracing technology to streamline operations and automate time-consuming tasks. Look into using tech like cloud-based accounting software and various digital marketing tools.


Make sure to discuss with your team how you can decrease costs and have a more efficient business. After all, they know your operations best.

Cost control and efficiency isn’t just about saving money but investing in your business’s future success.


Have a Profitable Business Despite Cash Rate Changes

Economic changes don’t have to negatively impact your business.

Since we’ve explored five key strategies to help your small business adapt to and thrive amid cash rate changes, it becomes easier for you to steer your business in the right direction. 

Your business now has a greater chance of remaining robust amid economic shifts.


If you need further assistance in ensuring business profitability no matter the current cash rate and economic climate, Unsecured Finance Australia is here to help. Apply online and you can receive your approval within 24 hours. 


Find out more by taking a look at our unsecured business loans.

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