Bank Debt rates

searcher profile

November 07, 2022

by a searcher from Concordia University in Milwaukee, WI, USA

As rates have continued to increase and lending is becoming 'more risky' for banks, what are people getting for rates right now from banks for loans over $5M? Have you also seen any Seller's notes asking for rates over 8%?

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Great question and I get this question almost every day. To provide some perspective, we are a Commercial Loan Brokerage shop with over 350 lending partners, so my answer is based on what we are seeing from those partners. In general for conventional financing we are seeing just about all institutions offering interest rates that are north of 6% for 5 to 10 year deals (on a rare occurrence we still find something in the 5% range) , and some have even moved into the 7.00% range. If you are looking at a line of credit pricing is typically anywhere from Prime minus 0.50% to Prime plus 2.50% with the mean probably Prime to Prime plus 1.00%. So that would put rates in the 6.50% to 9.50% range today with the mean in the 7,00% to 8.00% range. If you are doing SBA 7A financing, pricing can be anywhere between Prime to Prime plus 3.00%. I rarely see anyone price at prime and usually the lowest I see is Prime + 1.00%. So today you are looking at interest rates on an SBA 7A loan you will likely see interest rates between 8.00% to 10.00%. Most lenders will. not fix SBA 7A loans both those doing so are typically doing so in the 9.00% to 10.00% range today.

Although interest rates have moved up quite fast, I do believe they will be coming back down in late 2023 or early###-###-#### The real estate market is slowing dramatically and I do believe inflation is going to give back some. I also believe the increases the fed has made the last couple of months have been slow to impact the market because any deals that have closed in the last 60 to 90 days were likely locked in 60 to 90 days before that, so there is kind of a four to six month delay when rates go up before the full impact is felt. I do not have a crystal ball, but if I were a betting man I would not take a fixed rate above 8.00% today on a variable loan because I would anticipate that rate to adjust down below that level in the next 24 months when Prime comes back down. I hope this helps.
commentor profile
Reply by an intermediary
from Harvard University in San Diego, CA, USA
I recently had a seller ask for a 9% interest rate but that felt like it was above market and we went down to 7%. Standard has always been around 6% depending on the term, but more sellers that I work with are asking for higher rates on these notes. Not sure about SBA regs. but an adjustable seller note might bridge the gap and protect both parties, but it could be more of a headache than its worth applying a formula to something that will probably amount to a few thousand dollar difference each year.
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