The Bank of Canada’s latest rate cut will help small businesses raise capital, according to one expert, who says lower borrowing costs make debt more viable.
Jeremy M. Kronick, vice-president and economic analysis and strategy at the C.D. Howe Institute., joins us and talks about The Bank of Canada delivers 50 bps ra
“They were increasing rates at a very quick pace. Any businesses that had a prime based loan were all of a sudden paying much higher interest charges,” Ching said.“You can imagine that impact that it had when all of a sudden, your rate changes by three per cent to in two years. Now it’s come back down, the policy rate has now come back down to a much more reasonable level,” Ching said.
“So, companies that were typically not that interested to raise equity were forced to do so. Now equity is obviously a common instrument that’s used for small businesses to raise capital, but it’s a lot more desirable when you’re in an industry that has a much higher upside and a much greater multiple valuation,” Ching said.
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