The Rate Cycle Just Turned Around
For most of the last two years, business owners were told to wait: rates were heading down, so hold off and refinance later. On September 16, 2026, that plan stopped working.
The Federal Open Market Committee voted 12–0 to raise the federal funds target range by a quarter point to 3.75%–4.00%, its first increase since 2023. The statement was blunt: "Inflation remains elevated." [1]
The Prime Rate, which most variable-rate business loans are priced from, moved to 7.00%. [2]
Then Inflation Got Worse
On October 14, the Bureau of Labor Statistics reported that consumer prices rose 3.7% in the 12 months through September, up from 3.4% in August. Prices rose 0.6% in September alone, and gasoline accounted for more than half of that increase. [3]
That report changed the conversation about the Fed's next meeting.
Why October 27–28 Matters
The Fed meets again on October 27–28. Before the inflation report, futures markets put the chance of an October hike at roughly 22%. Within minutes of the release, CME FedWatch pricing jumped to about 50%, before settling back into the 30–40% range later that day. Pricing for a hike by December rose to about 90%. [4]
The Fed's own minutes point the same way. "Most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end," and 16 of the 18 officials who submitted projections expect at least one more quarter-point move this year. [5]
In other words, the question is no longer whether rates go down. It's how much higher they go, and how fast.
What This Is Already Costing You
If you have a line of credit, a variable-rate term loan or a business credit card, the September hike is already in your payments, usually within one or two billing cycles. [6] Small business owners are feeling it: in the NFIB's September survey, a net 8% reported paying a higher rate on their most recent loan, the highest reading since June 2025. [7]
The math is simple. For every $100,000 of variable-rate debt, each 0.25% increase adds roughly $250 a year in interest. That's small on its own. But it stacks:
| Balance | +0.25% (September) | +0.50% (one more hike) | +0.75% (two more hikes) |
|---|---|---|---|
| $100,000 | ~$250/yr | ~$500/yr | ~$750/yr |
| $500,000 | ~$1,250/yr | ~$2,500/yr | ~$3,750/yr |
| $1,000,000 | ~$2,500/yr | ~$5,000/yr | ~$7,500/yr |
These figures are simple interest estimates on the full balance. Your actual cost depends on your loan's margin, caps and how much of the line you draw.
Four Moves to Make Before the Next Meeting
1. Find Out Exactly What You're Exposed To
Pull every loan agreement and write down three things for each: the index (Prime, SOFR or something else), the margin above it, and whether there's a rate cap. Most owners know their payment, but not what drives it.
2. Price Out a Fixed-Rate Refinance, With Eyes Open
Fixed-rate term loans are priced off longer-term rates, not the Fed's overnight rate. Be aware that those have climbed too: the 10-year Treasury closed at 5.29% on September 30. [2] A fixed rate won't be cheap, but it does take further hikes off the table. If you have debt you plan to carry for three years or more, compare a fixed quote with your variable rate plus one or two more hikes.
3. Look at SBA 504 for Real Estate and Major Equipment
SBA 504 loans carry fixed rates for the life of the loan. In October 2026, 504 debenture rates range from 6.30% to 6.97% across 10-, 20- and 25-year terms. [2] Many borrowers would pay more than that on a loan priced at Prime plus a margin, and a 504 rate doesn't move if the Fed keeps going.
4. Pay Down the Most Expensive Balances First
If you have spare cash, put it on the highest-rate variable balance, usually a credit card or merchant cash advance, before anything else. Each dollar you pay down there saves more than a dollar on a cheaper loan.
When Staying Variable Still Makes Sense
Fixed isn't automatically better. A variable line of credit is still the right tool if:
- You draw and repay within a few months (seasonal inventory, payroll gaps)
- Your fixed-rate quote carries a large premium or a steep prepayment penalty
- You expect to pay the balance off well before more hikes would matter
The point is to make the choice on purpose, not by default.
The Bottom Line
The era of "wait for rates to fall" is over for now. The Fed has raised rates once, its officials are signaling more, and the latest inflation report gave them a reason. Business owners who understand their exposure and lock in where it makes sense before October 28 will spend the next year paying a known cost. Everyone else will find out what they're paying one statement at a time.
If you want to see what a fixed-rate option would look like for your business, DirectCredit can match you with lenders offering term loans and SBA products in a single application.
Sources
- Federal Reserve, FOMC statement, September 16, 2026
- Lendio, Current SBA Loan Interest Rates, October 2026 (Prime, 10-year Treasury and SBA 504 rates)
- U.S. Bureau of Labor Statistics, Consumer Price Index – September 2026 (released October 14, 2026)
- FinanceFeeds, Will the Fed hike on 28 October? What the odds did after a 3.7% CPI
- Investinglive, FOMC Minutes: Most participants assessed another hike would likely be appropriate by year end; ABA Banking Journal, FOMC minutes show another rate increase possible
- CNN, The Fed just raised rates. Here's what it means for borrowers and savers
- NFIB, Small Business Economic Trends, September 2026
