Financial Solutions, Business Banking

Weathering the Inflation Storm

When inflation hits, every aspect of your business becomes more expensive. While inflation is a challenging time for businesses, it doesn't have to be a time of panic. With an easing of supply chain pressures and falling energy prices, among other indicators, many economists believe that inflation could ease up and fall to around a 3% annualized rate by the end of the year. 1

In the meantime, here are some strategies to help you weather this inflationary storm.

The Storm: Interest Rates

In an effort to curb inflation, the Federal Reserve has aggressively been raising interest rates. As of March 22, 2023, the Fed’s ninth rate hike over the past year brought their benchmark interest rate to just under 5%. If your business relies on borrowing to fund your operations, you may be facing higher borrowing costs.

What you can do

Consider locking in low fixed interest rates for a loan or line of credit today, or other interest rate hedging strategies, before interest rates rise further.

The Storm: Labor Shortages

Inflation is causing additional labor hardship for businesses already struggling to recruit and retain workers since the major pandemic-induced disruption in the workforce. When prices rise, workers may demand higher wages to keep up with the increased cost of living.

What you can do

Many businesses are strapped for working capital as they are being forced to increase salaries and benefits to attract and retain workers. Securing a business line of credit can help bridge any funding gaps until the economy returns to an even keel.

Click here to explore our financing options.

The Storm: Supply Chain Issues

In addition to labor challenges, supply chain issues pose a significant threat to businesses during inflationary periods. As the cost of goods and services increases, you may struggle to maintain profit margins if you are unable to pass those costs on to your customers.

What you can do

Consider diversifying your suppliers and exploring alternative sourcing options to help ensure access to the materials and resources you need to operate even when prices are on the rise. As with the labor shortage, securing a line of credit at today’s interest rates can help bridge funding gaps until the economy stabilizes.

The Storm: Safety of Deposits

The recent high-profile collapses of Silicon Valley Bank and Signature Bank in the span of just a few days may have you wondering whether your business bank — and your capital — is safe. The answer is likely “yes.” (The FDIC reports that over the past decade, less than 1% of FDIC-insured banks failed annually).2 Even so, there are steps you can take to protect your business deposits.

What you can do

Now is the time to ensure that your money is secure in a well-capitalized, FDIC-insured bank like Washington Trust. FDIC member banks provide deposit insurance up to $250,000 per depositor, per account ownership category. Washington Trust offers you additional FDIC insurance for larger deposits through multiple programs:

  • CDARS® (Certificate of Deposit Account Registry Service) gives you access to multi-million-dollar FDIC insurance through participating network banks and is one of the safest and smartest investment vehicles for investors looking to protect their large dollar investments while earning CD-level returns that may compare favorably to Treasury and money-market-fund yield.
  • ICS® (Insured Cash Sweep) program allows you to earn interest and access multi-million-dollar FDIC protection on your large savings deposits.
  • Demand Deposit MarketplaceSM program is a liquid FDIC-insured alternative to money market mutual funds that enables your business to obtain millions of dollars of FDIC insurance with daily liquidity and potentially higher returns.

Click here to learn more about our full suite of cash management solutions.

Washington Trust Can Help

In challenging times, Washington Trust is a haven from the storm. We have weathered worse economies than this in our 222 years, and we are ready to put our strength, stability, and expertise to work for you. If your business in Rhode Island, Connecticut, or southeastern Massachusetts needs additional working capital, a line of credit, or just some expert guidance, our team is here for you.

1 Factset

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For more information or to speak with one of our trusted advisors about your unique financial needs, contact us at 800-465-2265 or submit an online form.

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