Jay DeMarteau

speaker

62 appearances 1 recordings 1 series first heard Aug 2019 last heard Aug 2019

Jay DeMarteau’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Interest Rates: Impact on Small Business · 22 Aug 2019 podcast

If you think about a small business, they really have kind of two sides of their balance sheet.

You know, their debit side, which is their kind of houses their assets, things like cash, investable securities, things like that.

And then their credit side, which is debt.

and it really kind of hits both sides of their balance sheet.

If you think of the credit side first, most small business loans, and you know, look, the term small business is bantered around a lot with many different definitions.

Here at TD Bank, we define someone as a small business segment

participant if they have revenues less than $5 million annual revenues.

And when you think of that segment, they tend to be very small.

So when they get a loan, their loans are primarily prime based and prime moves very in sync and it's correlated to the Fed fund rate.

So the cost of borrowing should have gone down by 25 or more basis points when Jerome Powell did what he did.

So in an interest rate decreasing environment, a lot of small businesses.

Well, let's use the term businesses, right?

Larger businesses in the community space start to think about, well, should I borrow now or can I wait?

Because rates are going to keep going down now.

There are two types of loans generally.

There's many different types of loans in terms of structures, lines of credit, mortgages, things like that.

But when you think about rates, you can either lock in your rate and get a fixed rate loan or you can play interest rate changes and have a variable rate loan.

So if interest rates are going to keep going down, it's always smart to wait and take advantage of and try to get the lowest fixed rate loan that you can.

You know, that's true.

And I would tell you, J.R., that if you look back in the late 70s and early 80s, the prime rate was in the 20s.

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