Bank Loan Blues
March 11th, 2009
With all the talk about banks not lending and no credit, I feel the need to say it has not been our experience.
Today’s historically low interest rates demand that we refinance long-term debt. We’ve got a 75,000 square foot facility financed with two notes: an SBA 504 loan on 40% and conventional bank loan for the 50% with 10% equity investment.
With our 5 year prepayment penalty having recently expired on the bank note, which is currently a variable rate adjusted quarterly, I have sought lenders to refinance into the longest fixed rate they would offer, and got three offers. Three.
I’ll admit that the bank has a very secure position, since the SBA takes the second lien, meaning that the bank gets their 50% first, should a default occur. Also, our balance sheet is, well, in balance, but we’re a small business in an uncertain economy with…you know the tiring refrain.
The offer we took will get our payments fixed for ten years in the high six percent range, so much better than the variable rate that has soared to over 9% at times during the past five years. As a business manager, I can now budget more accurately, and my guess is that there will certainly be higher interest rates in the next ten years that will make this deal, well, a deal.
Maybe this locked-up credit market is about what the talking heads call “interbank” lending, which my international finance background (not) doesn’t understand. The point is, not all lending is shut down, and we will be better off financially because of it.
Does anyone else have a similar experience?
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March 12th, 2009 at 5:34 am
Nice comments and good work on your deal… it’s just too bad you didn’t contact us to help you. If it’s not too late, your deal is what we specialize in and have won numerous awards because of it. Regardless, take care and keep up the good work.
Chris