Oct 2, 2026 · @Smart Business Funding
By Anthony Collin, CEO, Smart Business Funding. $500M+ funded since 2014. Updated October 2026.
For most of the past three years, business owners heard one story about rates: they were coming down. On September 16, 2026, that story changed.
The Federal Open Market Committee voted 12–0 to raise the federal funds target range by a quarter point, to 3.75%–4.00% (Federal Reserve). Major banks lifted the prime rate from 6.75% to 7.00% effective September 17, its first increase since July 2023 (PrimeRates.com).
If you have a HELOC, or are thinking about one for your business, this is the number that matters. Here’s why, and what to do about it.
Why prime is the number to watch
Most HELOCs, residential and commercial, are priced as an index plus a margin. The index is usually the prime rate. If your margin is 0.50% and prime is 7.00%, your rate is 7.50%. When prime moves, your rate typically follows on the next billing cycle.
The national average HELOC rate was 6.811% in the week of September 22, collected after banks raised prime (MonitorBankRates), and 6.78% as of September 24 (MonitorBankRates). Treat any average with care: published averages can include introductory rates that later reset higher (Yahoo Finance).
What a rate move does to your payment
Many HELOCs allow interest-only payments during the draw period, so rate changes show up immediately in your monthly bill. Here is the interest-only payment at today’s average and at higher rates.
| HELOC rate | Change from 6.78% | Monthly interest on $100,000 | Monthly interest on $250,000 |
|---|---|---|---|
| 6.78% | , | $565 | $1,413 |
| 7.03% | +0.25 | $586 | $1,465 |
| 7.28% | +0.50 | $607 | $1,517 |
| 7.78% | +1.00 | $648 | $1,621 |
| 8.78% | +2.00 | $732 | $1,829 |
A quarter-point move adds about $21 a month on $100,000. That alone won’t sink a business. The risk is that moves stack up, and rates can swing a long way. In September 2024 the average HELOC rate was roughly 10% (CBS News).
What could come next
The Fed’s September projections put the median year-end 2026 policy rate at 4.1%, which implies one more quarter-point increase this year. The next meeting is October 27–28, 2026 (Admiral Markets). Projections are not promises, and they change with every meeting. The point is not to predict the Fed. It is to make sure your plan works if rates rise again.
Five questions to ask before you open a variable line
- What index is the rate tied to, and what is the margin?
- Is there a lifetime rate cap, and what is it?
- Can I lock part of the balance at a fixed rate? Some lenders offer this (The Mortgage Reports).
- When does the draw period end, and what will the fully amortizing payment be?
- Does the payment still work for my business if the rate is two points higher?
A stress test you can do in five minutes
Illustrative Composite Scenario. Hypothetical figures for teaching purposes; not a real client or an offer.
An auto repair shop owner plans to draw $150,000 on a HELOC to add two service bays. At 6.78%, interest-only payments are about $848 a month. At 8.78%, they are about $1,098, a difference of $250 a month or $3,000 a year.
The owner checks whether the new bays’ projected profit covers the higher figure with room to spare. It does, so the plan holds. If it hadn’t, the right move would be a smaller draw or a fixed-rate portion, not hoping rates fall.
Where fixed-cost funding fits
Not every need belongs on a variable line. Our Direct Fund Program, a merchant cash advance, sets its cost as a factor rate at signing. Your remittance is a fixed daily or weekly amount that does not move with the prime rate. The trade-off is a higher total cost and a shorter term of 2–10 months, so it suits short, specific needs rather than long-term financing. We break down the math in HELOC or Cash Advance? Run the Real Numbers.
For other structures, compare business lines of credit and equipment financing.
Keep reading
- Deciding which property to borrow against: Your House or Your Building?
- Checking how much equity you can access: Your Home Might Be Your Business’s Biggest Untapped Asset
Rate exposure differs by business, so see how we work across industries and how our process works. Want a second set of eyes on your numbers? Contact our team or start an application. Visit smartbusinessfunder.com or call 1-866-Re-Smart.
This article is for general education and is not legal, tax or financial advice. Rate data reflects published sources as of late September 2026 and will change. HELOC rates and terms vary by lender, state, property and borrower and are subject to credit approval. The Direct Fund Program is a purchase of future receivables, not a loan. Scenarios labeled Illustrative Composite Scenario are hypothetical.
You can see every program side by side on our business funding page, and read how each works in our business financing guide.
Your next step
See how property, vehicles and other assets can unlock larger amounts. You can also look at a home equity line of credit.
Apply nowAsset based financingCompare all optionsApplying uses a soft credit pull only. Offers usually arrive in 1 to 5 hours on a complete file. All funding is subject to underwriting and approval. Call 1-866-737-6278 (866-Re-Smart).
