This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How Higher Rates Touch Consumers, Firms, Investors

â¿¿SMALL BUSINESSES.

Higher rates could further depress loan demand at many small businesses, at least in the short run.

But higher rates can also benefit small business because they signal that the economy is strengthening. Once companies make more money because they have more customers, they're more inclined to expand or buy equipment even though financing is costlier.

Bella Bag, a retailer of designer handbags and other accessories based in Atlanta, is borrowing for the first time in its eight-year history. Chief financial officer Brian Froehling said the company decided to do so now because it thinks rates will rise.

Steadily higher rates might give the company pause before it borrows again, Froehling said. But it's hired four staffers this year in response to growing demand. It will likely fare well even if rates rise further, he said.

â¿¿ BIG BUSINESSES.

Large U.S. companies have sold more than $4 trillion in bonds to investors in the past 2½ years, according to Dealogic, a research firm. That's more than the annual gross domestic product of every country in the world except the United States, China and Japan.

The biggest sale ever was Apple's offering of $17 billion in bonds in April.

As rates began rising last month, new sales slowed. Companies with top credit ratings sold only $9.5 billion in bonds last week, according to Dealogic â¿¿ 60 percent less than the average for each week through April this year.

Still, companies have been collecting record profits. That means they should still be able to expand their businesses and hire more, even if borrowing costs rise.

â¿¿ PENSION FUNDS.

Rising rates are a relief for companies with employee pensions. Accounting rules require them to use bond rates to determine how much money to set aside so they'll be able to pay retiree benefits in the future.

4 of 6

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,985.61 +78.99 0.47%
S&P 500 1,972.83 +9.12 0.46%
NASDAQ 4,419.0340 +27.5710 0.63%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs