# business loan rates



## mfh1 (5 Nov 2008)

anyone have current imformation on business interest rates at moment- specifically non-residential loan/mortgage rates?
thanks


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## VOR (5 Nov 2008)

Hi mfh1, do you mean residential investment mortgage rates or commercial rates for retail,office units etc? 
Rule of thumb is that generally residential investment mortgages are typically about 0.25% above resi mortgages for your PDH. 
Commercial rates vary depending on the amount, LTV, the security and of course the risk. It could be anything from 1% to 4% above Euribor or the bank's prime rate.(1% being a vet, dr or pharmacist in his/her premises with a good turnover.)


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## mfh1 (5 Nov 2008)

thanks vor
its dental surgery.payin 6.05 with AIB at moment.was 6.35 before rate reduction in oct.think it might be slightly over odds but not much


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## VOR (6 Nov 2008)

Excuse me for excluding dentists!! Obviously such a profession should attract the best rates also. 
3 M Euribor hit 5.39 in September but is back to 4.59% today. 
You may be paying over a bank's prime. For example, BOI was 5.07 yesterday which was approx. 40 bps above Euribor. AIB do not disclose their prime rate any more so I am estimating it is comparable to BOI. In such a case you are paying about 1% above this.
If you do choose to move, consider the admin fee attaching which could be as much as 1% and also the cost of legals and a valuation.


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## WILLY NILLY (7 Nov 2008)

VOR said:


> Excuse me for excluding dentists!! Obviously such a profession should attract the best rates also.
> 3 M Euribor hit 5.39 in September but is back to 4.59% today.
> You may be paying over a bank's prime. For example, BOI was 5.07 yesterday which was approx. 40 bps above Euribor. AIB do not disclose their prime rate any more so I am estimating it is comparable to BOI. In such a case you are paying about 1% above this.
> If you do choose to move, consider the admin fee attaching which could be as much as 1% and also the cost of legals and a valuation.




I have two buy to let loans, one with AIB and the other with EBS.

AIb passed on the first half percent rate cut in full - now 5.2% and hopefully they will do so again with the second half percent rate cut. 

I assumed EBS had done the same but as the November mortgage payment hadnt dropped I rang them today.  I got a nasty shock.  As the Buy to Let loan is classified as "commercial" by the EBS, they wont be passing on the first rate cut and they have yet to make up their minds about the second rate cut. 

The loan with EBS is for 160k------ Int only---- variable rate .

Has anyone  else had this bad news?


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## archers (18 Jan 2009)

can a business loan be switched to any other type of loan?


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## smiley (19 Jan 2009)

VOR said:


> 3 M Euribor hit 5.39 in September but is back to 4.59% today.
> QUOTE]
> 
> VOR, where are you finding those euribor rates? 3 month euribor is 2.5%...what am i missing?


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## KFB123 (25 Jan 2009)

Hi Smiley, post was last November so euribor rates were correct as of then. Easy mistake.
However they are even lower than 2.5% now, they are 2.199% 3 month euribor as of Friday. So anyone who is on 3 month euribor has had their rate reduced by circa. 3% in last few months which is a big help and in most cases will effectively half the interest rates they were paying


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## marksa (25 Jan 2009)

KFB123 said:


> Hi Smiley, post was last November so euribor rates were correct as of then. Easy mistake.
> However they are even lower than 2.5% now, they are 2.199% 3 month euribor as of Friday. So anyone who is on 3 month euribor has had their rate reduced by circa. 3% in last few months which is a big help and in most cases will effectively half the interest rates they were paying


 
that is provided the loan is indexed in the facility letter to 3M Euribor + a margin. This would mean that it would be a term loan with quarterly repayments of interest and/or principal.

If the loan is indexed to something else such as Prime or AA business loan rate, then its a bit like being on a standard variable rate mortgage for a personal customer with a Principal Private Residence (PPR) mortgage. There is no guarantee that the lender will pass on the reductions in wholesale interest rates (Euribor, Libor, ECB repo etc.)


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## mcaul (26 Jan 2009)

Most business loans are at xx percent above banks "cost of funds" rate. Or the euribor rate.

Ulster Banks cost of funds is 2.8% at present.

In that case a businees loan would be approx. 6%


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## marksa (26 Jan 2009)

mcaul said:


> Most business loans are at xx percent above banks "cost of funds" rate. Or the euribor rate.
> 
> Ulster Banks cost of funds is 2.8% at present.
> 
> In that case a businees loan would be approx. 6%


 
I would expect, as mentioned earlier in the post, that the margin will depend on the credit rating of the customer. 2.8% might be the rate for an average, small reasonably profitable SME business. A company in financial difficulties - e.g. loss making would expect to pay more, while a large corporate such as CRH would expect to pay less. And again, if the loan is secured against an asset such as a premises, the rate will be different again. Finally, don't forget to take account of the term of the loan. The longer the loan the more the risk of the business defaulting, and thus the price should be higher. 

So there are 3 dimensions at play here 

Risk for the Bank, how creditworthy the business is (probability of default to use the technical term)
Level of security/collateral
Maturity - term of the loan. The longer it is, statistically higher chance of the business defaulting
To be totally unfair the whole Irish Banking Industry, most of the above was ignored for the last number of years, with money being thrown out to any old business without the bank having a sound understanding of the risk in the deal - they just priced lower than the competition. All this leading to the **** that we (yes US - not just the Banks) are now in.


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## exbroker (27 Jan 2009)

Bank of Ireland currently is 2% over COF, rates are from 4.15%.


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