Written on: October 1, 2026 by Jeffrey Simpson
Three dissenting votes were all it took to mark the largest disagreement on interest rate policy in 10 years during the most recent Federal Open Market Committee (FOMC) meeting. The 9–3 vote held the Federal funds rate steady, but the message was clear: a growing number of officials want to hike rates to tackle persistent inflation. For business owners, that means cloudier guidance about the cost of borrowing and little relief on the price of goods and services heading into the winter. Whichever way the Federal Reserve moves at its mid-September meeting, the cost of doing business isn’t easing anytime soon.
Rising capital investment, easing bank lending standards and modest household consumption growth in the first half of 2026 could again support holding rates steady. However, more than five straight years of inflation exceeding the Fed’s 2% target, combined with this year’s oil price shock, have everyone’s attention. Several fuel and HVAC industry-specific indicators remain elevated, too.
Let’s start with payroll. On a macro level, reduced immigration and slow population growth have tightened the labor pool. Meanwhile, closer to home, the TechForce Foundation recently found that new graduates are meeting just 42% of demand for technician job openings. HVAC, automotive and diesel technician graduates are filling just 63%, 70% and 48% of open roles, respectively. The technician shortage isn’t new to those of us in the industry, but the dearth of skilled technicians continues to push both direct labor and service provider costs upwards.
Vehicle costs tell a similar story. Demand for commercial vehicles, especially cargo vans and pickups, is climbing. High raw material costs and ongoing tariffs continue to inflate fleet expenses. Work Truck Solutions, a commercial vehicle authority, reports that while new commercial vehicles have held steady this year, used commercial vehicle prices are up 8.8%. The median mileage on fleet vehicles has jumped 24.5%, meaning businesses are holding onto vehicles longer and running headlong into higher maintenance costs, often from service firms that are themselves paying more to retain their technicians. Throw in significantly higher fuel expense, the impact of AI demand on the cost of tech-embedded HVAC equipment and the new refrigerant compliance and it becomes increasingly clear this won’t be a typical Winter.
Review Budget Plans
In the face of rising operating costs—not to mention higher commodity prices that fortunately held off until late last Winter—owners are in a tenuous situation. To borrow the time-worn phrase, hope is not a strategy. It’s understandable why financial planning often takes a back seat for small businesses when owner-operators are laser-focused on running the business. However, that can leave business owners vulnerable. Taking the time to build a comprehensive budget before the next heating season or the new fiscal year provides a clear-eyed view of the true cost of what wage increases, maintenance costs or higher line of credit balances mean for margins.
It’s the necessary groundwork that allows companies to set fuel and service margins in order to protect profitability. Prices across most aspects of business are increasing faster than usual, and I guarantee that suppliers—and the bank—are expecting companies to manage the adjustments. Fortunately, there are a host of advisory and accounting firms that can assist with this process if businesses don’t have the internal resources to undertake it.
The Financing Window May be Narrowing
Back to the Fed decision and interest rates for a moment—while bank lending and the broader availability of private capital remain accessible to well-run companies, rates show little sign of falling anytime soon. If you’ve been sitting on plans to refinance, recapitalize or simply convert floating-rate debt to fixed, now is a reasonable time to act. Capital is available and borrowing costs, while elevated, remain manageable to support growth, provided you come to the table with a well-structured ask.
One thing you can consider doing is to ask your financial advisor or accountant to stress-test debt service coverage ratios against further rate increases, not just flat rates. This is especially important if you have narrowly cleared loan covenants or if you experienced a slower or cooler response from your banker lately.
Control What You Can
Continued Middle East tensions and elevated commodity costs will strain many fuel dealers this Winter, but the steady upward march of direct and indirect costs across nearly every part of operations calls for more deliberate planning than may have traditionally been devoted to it. Take the time now to examine costs and set healthy margin targets that control your destiny and protect your business. That planning is worth far more than it costs.
Extend the same control to your customers. Remind them that they have the ability to enter a budget payment program, a price cap or tiered service plans that let them choose the level of predictability that fits their finances.
In a high-price environment, securing flexibility for your company and providing flexibility to your customers is good business. None of us can control the Fed, the weather or the price of oil, but a clear budget, solid financing plan and options for your customers will go a long way to smoothing out a potentially bumpy ride. ICM
Jeff Simpson is the Founder and managing member of Notch Capital, a private investment firm specializing in buyouts and recapitalizations of lower middle market businesses in the heating, cooling and home services industries. Notch Capital also provides advisory services to help these businesses strengthen their performance and analyze acquisitions.
