After six years, the Federal Reserve announced the final draw-down of its bonding-buying program, known as quantitative easing, at its policy meeting in late October. Most economists expect the move will increase interest rates.
“Interest rates are going to start creeping up in 2015," says Neil Wessan (pictured), managing director at CIT Capital Markets. “The Fed is going to be concerned about the amount of money that’s been pumping into the system, which in the past has led to fairly high levels of inflation. They will try to take steam out of the system, and they’ll do that with rates.” For middle-market businesses, a rise in interest rates could potentially hurt profitability, according to Wessan.
Loans in the middle market will continue to be provided by non-regulated financial institutions, as banks struggle to compete in the space, according to Monroe Capital CEO Ted Koenig.
The Fed’s leveraged lending guidelines will continue to hold back lending by banks, which gives non-bank lenders, especially business development companies, an opportunity to provide highly-leveraged loans.
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