If your business carries debt, rising interest rates are already working their way into your cash flow, whether you’ve spotted it yet or not. The cash rate is now 4.60% after the fourth rate rise of the year, and most owners don’t find out what that costs them until the bank statement lands.
The problem isn’t the rate itself. It’s that interest is a silent line item, and nobody tells you when your repayments go up. The response is practical: get visibility over your debt, pay down the expensive facilities first, ask your bank for a review, get paid faster and make sure your prices have kept pace with your costs.
In Episode 23 of Business Uncut, Reuben walks through a five-step playbook for protecting your cash flow while rates sit where they are, the two traps to avoid and the one thing to build this week.
Key takeaways
- The cash rate is 4.60% after the fourth rise of the year, and the extra interest leaves your account quietly.
- Pay down the most expensive debt first, not the biggest, and ask your bank for a pricing review.
- Shorter debtor days and a small price rise can cover the extra interest.
- Build a 13-week cash flow forecast this week so you see the pressure before it lands.
Interest is the silent line item
Nobody emails you to say your repayments have gone up. The extra interest simply comes out of the account, quietly eating the money you’d set aside for stock, wages or that second ute.
That’s what makes rate rises so easy to miss. They don’t hit your profit and loss loudly. They hit your bank account quietly, and the cash you were counting on for the next move in the business is gone before you’ve noticed.
A hypothetical example: what 1% costs on $800,000 of debt
Here’s a hypothetical. You’re a builder carrying $800,000 across an equipment loan and an overdraft. If your rate has moved up a full percentage point across this year, that’s roughly $8,000 a year straight out of profit.
Hypothetical example
A builder with an equipment loan and an overdraft. Same jobs, same team, same margin on paper.
Nothing changed in the business. Same jobs, same team, same margin on paper. You’re simply $8,000 poorer, without having made a single decision that caused it. That’s why the playbook below starts with visibility.
Step 1 Build the debt list
Start by writing down every facility the business has. For each one, record:
- The balance
- The rate
- The end date
- The repayment
You can’t manage what you’ve never written down, and most owners we speak with genuinely can’t tell us what their overdraft rate is. The list often turns up something you’d forgotten about.
Hypothetically, you find a leftover card at 19% carrying $30,000. That’s your first fix. The principle: visibility before strategy.
Step 2 Kill the expensive debt first, not the big debt
It’s tempting to attack the biggest balance first because it feels like the biggest problem. But a small balance at a high rate can cost more than a big balance at a cheap one.
Say, hypothetically, you’ve got $100,000 sitting in an offset doing nothing urgent. Paying down the 19% card beats paying down the 7% equipment loan every day of the week. The principle: chase the rate, not the size.
Step 3 Call your bank and ask for a review
Loan pricing isn’t fixed, and lenders reprice to keep good customers. If you’ve got two years of clean trading behind you and your loan to value has improved, you’ve got a case.
It’s one conversation, and the downside is small. The principle: the worst they can say is no.
Step 4 Shorten your debtor days
This is the step everyone skips. Getting paid seven days faster is like a free increase in your facility, and it costs you nothing in interest.
The practical levers are simple:
- Take deposits up front
- Get progress claims out on time
- Chase overdue invoices at day one, not day thirty
The principle: your customers shouldn’t be funding their business with your money. We look at debtor days, debt repayments and the gap between profit and cash in more detail in our episode on why a profitable business can still run short of cash.
Step 5 Reprice your own work
If your costs are up and your prices haven’t moved all year, you’ve absorbed the whole increase yourself. Higher interest is one more cost sitting on top of everything else.
Even 2 or 3% on your rate card can cover the extra interest (see our pricing strategy guide). The principle: margin is the cheapest form of finance there is.
Margin is the cheapest form of finance there is.
Two traps to avoid
When rates are moving, two mistakes come up again and again:
- Panic-fixing everything at the top of a cycle. Fixed rates can look like safety, and sometimes they are, but you lose flexibility right when you might want it.
- Using the ATO as an overdraft. Interest and penalties bite. And with Payday Super now law from 1 July 2026, super has to reach the fund within seven business days of payday.
That second trap matters more than it used to. Super now leaves your account faster than it did, so plan for it rather than letting it catch you short.
Your one action this week: build a 13-week cash flow forecast
This week
Not a budget. A week-by-week view of money in and money out over the next 13 weeks.
Thirteen weeks is far enough out to see trouble coming and close enough to actually fix it. Once it’s built, your repayments, your debtor days, your pricing and your super timing all sit in one view, so you can see where the pressure lands before it arrives.
Frequently asked questions
How do rising interest rates affect business cash flow?
Higher rates lift your repayments, and that cash leaves your account quietly, without anyone flagging it. In our hypothetical example, a builder carrying $800,000 of debt loses roughly $8,000 a year to a one percentage point rise, with nothing else in the business changing.
Should I pay off my biggest loan or my highest interest debt first?
Chase the rate, not the size. A small balance at a high rate can cost more than a big balance at a cheap one, so in our hypothetical example, paying down a 19% card beats paying down a 7% equipment loan. Check your own facilities with your adviser before you move money around.
When does Payday Super start?
Payday Super is now law from 1 July 2026. Super has to reach the fund within seven business days of payday, so that cash leaves your business faster than it used to. Build it into your cash flow forecast so it doesn’t catch you off guard.
What is a 13-week cash flow forecast?
It’s a week-by-week view of money coming in and going out over the next 13 weeks. It isn’t a budget. Thirteen weeks is far enough ahead to see trouble coming and close enough to do something about it.
Keep reading
Want your debt costs under control?
Rates will do what they do. We’ll help you run the numbers on your debt and build your 13-week forecast.
General information only, not personal tax, legal or financial advice. Figures are hypothetical examples. Talk to your adviser about your own situation.
