Swedish entrepreneurs can look forward to lower financing costs

With today's reduction in the policy rate, Krea believes that entrepreneurs can finally begin to look forward to lower financing costs. The positive news comes after a turbulent two-year period marked by high inflation and rising financing costs, which have posed an economic challenge for many businesses.

The announcement of the rate cut was welcomed by many Swedes. For business owners as well, it may signal brighter times, as changes to the policy rate can have a positive impact on the interest rate curve for business financing.

Based on Krea's own data, combined with its experience of the credit market, interest rates on business credit are expected to decline over the long term if the policy rate continues to fall. This will occur with some lag, as banks and other lenders are likely to increase their risk appetite gradually as the market shows greater stability. The rate decision is therefore positive for Swedish entrepreneurs, but its full impact will be felt further down the line.

Other factors also influence entrepreneurs' financing costs

The interest rates entrepreneurs experience in the market are affected by the policy rate, as the policy rate influences how much lenders have to pay to fund themselves (referred to "funding cost"). However, lenders can also reduce their funding costs in other ways, for example by obtaining a banking license that allows them to accept customer deposits.

New niche lenders have entered the business credit market, contributing to increased competition and more attractive terms for entrepreneurs. In addition, new financing options for specific segments such as inventory financing and financing of tangible assets, have helped deliver more attractive terms compared with traditional business loans.

A continued downward trend is positive for businesses

Over the past year, the financing costs on Krea's platform have decreased slightly, while the Riksbank has kept the policy rate stable at 4%.