This is the first time that the US is stripped off its pristine credit rating and slashed off to AA+ and this particular decision of the credit rating agency has taken the consumers and investors by shock. The big question in the minds of most people is whether it is going to affect the entire financial industry, whether the mortgage industry, the debt industry or the auto loan industry.
Well, according to the recent researches of most financial analysts, it has been said that the credit downgrade will lead to a rise in the interest rates on the personal loans and therefore the people who are looking for ways to become debt free will be in danger as they may be subject to drastically high interest rates. Have a look at the ways in which the much talked-about credit downgrade will affect the small business organizations.
Government’s leverage to pump up the economy has gone down – What does this mean?
As the credit downgrade has decreased the US government’s leverage to pump up the economy, this certainly means that there will be some cuts in the federal spending and some new taxation rules that will be implemented very soon. This will further weaken the growth of the US economy and the new tax rules and laws may even take a toll on the small, medium sized business firms. The innovation will be directly affected and it is also being seen that the slashing of the federal spending will slow down the growth of innovation in the near future. As there in a sudden increase in globalization, the job growth and the overall demand within the economy may lead to stagnation within the economy.
The interest rates on the loans will go up – Will the business firms suffer?
The credit downgrade will lead to a rise in the interest rates on personal loans and if you’re a business owner who is already in debt and requires loans to become debt free, you must stay cautious. Lack of credit access coupled with higher rates on the personal loans will become a challenge to the financially struggling business firms. The dollar may fall and if this happens, this will raise the import coats, including gasoline. The business firms will be braced for tough and challenging times with the weak real estate prices too.
If the business organizations want to stay afloat in this tough economic situation, they need to make cash flow more efficient and they also need to be more cost-conscious. Though you may see low economic growth, you can take certain steps to live debt free and also maintain your personal credit rating.