Hello ! I have two committment letter from two different Bank for SBA loan.
Which load I should Choose ? Here are two options:
1) SBA Loan amount 1.1mil - 16 Years - prime + 2.5 % - First THREE year Fixed and then quarterly adjust....
2) SBA Loan amount 1.1mil - 16 Years - prime + 2.0 % - quarterly adjust. (No fixed amount)
Which one I should choose OR in any case if you I pay out all to sba after 5-6 years and refinance to a private bank - which one should be more benefits.
Full Version: Which SBA Loan to Choose !
If the only difference in the deals is the premium over the base rate and the time that the rate is locked, you are essentially making a bet in interest rates. Assuming that you have about $1,050,000 average outstanding during those three years, this is a bet that will cost you about $15,750.
A couple of weeks ago someone asked where we thought that interest rates would be a year in the future. I said that prime would be at 5.5% in December 2005. I expected a 50 bps increase in prime mirroring a similar increase in the Fed Funds rate. I was probably being too optimistic, because the Fed is probably going to increase fed funds by another 75 bps to a full point this year according to most economists. This means that under the scenario without a rate lock, you will soon be paying more than if you had chosen the one with the three year fixed portion.
Then again, these are only guesses as who knows what could happen in the next few months that might cause the Fed to change directions.
Just for reference, did you know that prime has gone up 1.25% in the last year?
A couple of weeks ago someone asked where we thought that interest rates would be a year in the future. I said that prime would be at 5.5% in December 2005. I expected a 50 bps increase in prime mirroring a similar increase in the Fed Funds rate. I was probably being too optimistic, because the Fed is probably going to increase fed funds by another 75 bps to a full point this year according to most economists. This means that under the scenario without a rate lock, you will soon be paying more than if you had chosen the one with the three year fixed portion.
Then again, these are only guesses as who knows what could happen in the next few months that might cause the Fed to change directions.
Just for reference, did you know that prime has gone up 1.25% in the last year?
This is more of a personal questions. What would make you feel more comfortable. With some the fixed rate gives them a piece of mind. Granted it will readjust quarterly after that. Then you could examine the options you have at that time. It sounds like if you increase your income and value in the property after you have the property awhile you will qualify for more competitive loans tied to libor.
Remember the prime is guestimated to go up. It has been going up inorder to improve our markets. Take the stock market into consideration. After the shock we experienced with the 9/11 the govt used its last resort to boost the economy by compensating with the primse. The lowest it's been in god knows how long... (Sorry I don't have my stats at home)
It's a personal decision to make... Look at the trends and I'm sure you'll be able to decide what's best for you.
My grandfather always said, " I"ve never been much of a gambler. I could never understand why someone would risk something for more, with the likely hood of chance/luck being against them. Then they end up with less then they could have originally had guarantee'd." (he was a simple man)
Remember the prime is guestimated to go up. It has been going up inorder to improve our markets. Take the stock market into consideration. After the shock we experienced with the 9/11 the govt used its last resort to boost the economy by compensating with the primse. The lowest it's been in god knows how long... (Sorry I don't have my stats at home)
It's a personal decision to make... Look at the trends and I'm sure you'll be able to decide what's best for you.
My grandfather always said, " I"ve never been much of a gambler. I could never understand why someone would risk something for more, with the likely hood of chance/luck being against them. Then they end up with less then they could have originally had guarantee'd." (he was a simple man)
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