The COVID-19 crisis has been hitting the world economy hard. With borders closing, airlines grounded, and offices of major organizations closed down for quarantine, many companies have been downsizing or even going out of business. For some areas of the economy, however, the crisis presented an opportunity for expansion and growth. Our company, called Online Call-lines, has been specializing in providing technical support for companies for the last five years. It utilized an organizational model that employed specialists from Asian countries (India, Vietnam) to provide affordable and quality service to customers in Europe and the US.
The model suggested an innovative approach of avoiding centralized offices, instead of relying on employees working from home, thus saving on renting spaces, transportation, and hardware (Waizenegger 430). Since the crisis escalated throughout February-April, the company received many contracts from major companies seeking to outsource their tech-support services due to offices closing and downsizing (Waizenegger 430). Online Call-lines did not lose any of its operating capacity due to its stay-at-home business model, which was why it was more prepared for the crisis than any of our regional competitors.
With the second wave of COVID-19 hitting the world in mid-September, it has become obvious that the company needs to expand to answer the rising demands projected for the remainder of 2020-2021. Doing so would require hiring additional staff, providing opportunities for training, and investing in servers to process the calls. This would require additional finances that the company on its own does not currently have on hand. One of the best and quickest ways to acquire the needed funds for expansion is through a banking loan. Due to the overall recession, the news media reports that the Federal Reserve is promising to lower the interest rate to an all-time low, very close to 0% – something which had not been done since the economic crisis of 2009 (Bikker and Vervliet 4). The purpose of this action is to stimulate economic activity by forcing banks to lower their interest rates on loans, thus offering more incentives to take them. As it stands, the decision by the Federal Reserve has not been achieved. Therefore, current interest rates are higher than they would be after the Fed lowers them (Bikker and Vervliet 7). Taking a loan at the present date, thus, would make the company lose more in the long run while offering the chance to expand earlier. Waiting, on the other hand, would offer better interest rates, at the price of losing a potential opportunity for expansion.
I believe that, while it would be cheaper to take a loan once the Federal Reserve decides to lower the interest rate for banks, it is better to take one now and use the opportunity provided by the crisis to expand earlier. All other competitors are likely to wait until there are more opportunities to take the loan, thus wasting time and momentum. Their expansion will happen at the same time, increasing the number of offers available at the market, thus driving the prices down, as per the laws of supply and demand. If we have already expanded by the time they only start, it would be easier for Online Call-lines to seize the advantage and take a good portion of the market already. Therefore, it is better to take the loan now, as the interest rate is fairly low as it is than to save 2.75% in interest rates at the expense of a one-time business opportunity.
Works Cited
Bikker, Jacob A., and Tobias M. Vervliet. “Bank Profitability and Risk‐Taking Under Low Interest Rates.” International Journal of Finance & Economics, vol. 23, no. 1, 2018, pp. 3-18.
Waizenegger, Lena, et al. “An Affordance Perspective of Team Collaboration And Enforced Working From Home During COVID-19.” European Journal of Information Systems, vol. 29, no. 4, 2020, pp. 429-442.