Morningstar reported that Bank of America expects the Federal Reserve to raise interest rates twice more in 2026. The forecast implies higher borrowing costs could persist, affecting small business lines of credit, SBA 7(a) loans, venture debt, and commercial financing tied to prime and SOFR. Variable-rate borrowers would see payments increase and debt service ratios tighten. Venture lenders may raise all-in coupons and strengthen covenants, while investors adjust valuation assumptions as discount rates rise. Higher policy rates also lift yields on Treasury bills and cash sweep accounts, enabling stronger treasury returns. Founders can prepare by stress testing for two hikes, negotiating covenants, fixing some rate exposure, and monitoring each FOMC meeting and the Summary of Economic Projections.
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