The Tangible Effects of Higher Interest Rates

Investors providing funding have an expected rate of return and that rate of return has a direct connection with interest rates. In theory, a 1 percentage point increase in core interest rates can result in an increase of 1 percentage point in an organization’s cost of equity and a 0.7 percentage point increase in an organization’s cost of debt (assuming a 30% corporate tax rate). Fortunately, a 1 percentage point interest rate hike would likely come as a result of strong economic growth and that growth may reduce the impact of the interest rate hike on the organization’s cost of capital. Therefore, most entrepreneurs have little to fear from higher interest rates, as long as they are in an industry whose growth tracks the overall economy.

Building on Market Experience – Part II of an Interview with Owen Matthews

Using a unique model, Alacrity leverages its network of advisors, mentors, and partners to identify gaps in the market. By founding and / or helping secure funding for companies that fill these gaps, Alacrity is able to provide value to both the company and the investor, ensuring a higher than normal rate of business success.