Federal Reserve Holds Rates Steady: What It Means for Small Business in 2026

The Federal Reserve held its benchmark interest rate steady at 4.25%-4.50% at its latest policy meeting, signaling a cautious approach as inflation continues to cool but remains above the 2% target. For small business owners, the decision has immediate implications for borrowing costs, cash management, and growth planning.

What the Fed Said

In its statement, the Federal Open Market Committee (FOMC) acknowledged that "inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated." The committee maintained its data-dependent stance, suggesting rate cuts remain on the table but aren't imminent.

"The Committee is attentive to the risks on both sides of its dual mandate. We continue to assess incoming data and the evolving outlook to determine the appropriate path of monetary policy."

Impact on Small Business Borrowing

With rates holding steady, small businesses face continued elevated borrowing costs:

Current Loan Landscape

• SBA Loans: 7(a) loans currently carry rates of 10.5%-13.5%, making large capital investments expensive
• Business Lines of Credit: Prime + 1-3% means rates of 8.5%-10.5%
• Equipment Financing: Rates averaging 8%-15% depending on creditworthiness
• Commercial Real Estate: Office and retail property loans at 7%-9%

When Will Rates Drop?

Market expectations suggest the Fed will cut rates 2-3 times in 2026, likely beginning in the second half of the year if inflation continues its downward trend. However, several factors could delay cuts:

• Sticky services inflation (housing, healthcare)
• Strong labor market keeping wage pressures elevated
• Geopolitical uncertainties affecting energy prices
• Potential fiscal policy changes

Strategies for Small Business Owners

If You Need to Borrow Now

• Shop around: Rate differences between lenders can be significant
• Consider SBA loans: Despite higher rates, longer terms improve cash flow
• Explore equipment leasing: May be more cost-effective than purchasing
• Look at revenue-based financing: Alternative lenders offer flexible terms

If You Can Wait

• Build credit: Improve your business credit score for better rates later
• Strengthen cash reserves: Take advantage of higher savings yields
• Prepare documentation: Get loan packages ready for quick action when rates drop

Cash Management Opportunities

The current rate environment offers a silver lining: business savings accounts and CDs are paying yields not seen in over 15 years.

• High-yield business savings: 4.5%-5.0% APY
• Business CDs: 4.75%-5.25% APY
• Money market accounts: 4.25%-4.75% APY

The Bottom Line

Steady rates mean no immediate relief for borrowers, but also no additional pain. Small business owners should focus on strengthening their financial position now to take advantage of lower rates when they arrive. Those with urgent capital needs should shop aggressively for the best terms available.