Commercial Loan Interest Rates

When shopping for a commercial loan borrowers typically want to know what their interest rates will be. This is not like shopping for a car loan where a bank can tell you where you fall on the credit matrix and estimate your annual interest rate for the loan. The following things are all considered when pricing a commercial loan.

  • Relationship with the lender. If you have deposit accounts with that lender or other loans that the bank earns revenue from, then the lender can use that income to offset the interest yield they need on the new loan. Essentially they can discount the profitability based on the global relationship.
  • The industry can present varied risks to a lender. Your businesses trends will be measured with the industry standard to determine your performance. Some industries are higher risk and have higher interest rates as a result.
  • Prepayment penalties will also impact your interest rate.
  • Your loan type. Start up loans, bridge loans, construction loans and other loan types may cost you more in the interest rate because of the inherent risks of these loan types.
  • The type of collateral offered to the lender can also impact your rate. If your lender is very comfortable liquidating your collateral they are more likely to give you a lower interest rate. (This means the bank is assuming less risk.)
  • Current market trends will affect the base rates. These trends are out of the bankers control. You may choose to monitor these base rates to see how they move. These basic indexes include the Prime Rate, TCM and Libor.

Other factors can also impact the interest rate for your loan request. Be compassionate when you ask a lender what your rates will be. It is very difficult for them to pin a number down for you; however, they can provide a reasonable estimate, or pricing as of the date of your request.

We understand your pain and the bankers pain. We know what good interest rates look like in the today’s market. We contract directly with you to protect your interest in the loan process. We can ensure you obtain the best interest rate pricing for your loan. Give us a call to discuss your deal today.

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