Question


Mike W

I just applied for a business loan yesterday at BB&T.. do these rates seem high?

As I started above.... the lady advised I should apply for what they have called a "Business Advantage Credit Line" which means I can have credit available up to $100,000 so I don't have to go through the whole process of having to apply for a specific loan and will benefit if I need to make in instant purchase. She said corporate makes the decisions for small business loans and do not provide the rates. She said typically they come back at 8%-9% for a vehicle and equipment etc. I have never applied for a business loan and not too familiar with the market, mostly try to save and pay cash for everything. Does 8-9% seem high, low, average?

3 months ago - 1 answers

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That's not a bad rate if this is a business line of credit. I'll bet your rate will be a tad higher on a line because she said the 8-9% rate is for a loan that would be collateralized by equipment... this one would not. The reason you aren't seeing rates in the personal home equity line rate range is because business loans are far more risky and expensive to take legal action if necessary (the bank). On that note, be sure you are aware of exactly what is securing the loan. In my experience in banking/lending, most business borrowers didn't realize when business lines were actually guaranteed by them personally versus just tied to the business or both. The three banks I've worked for all sold business lines with light processing and quick turnarounds, but ALL of them were ultimately guaranteed by the individuals and THEIR personal assets. They even had some business lines that placed a lien on the business owner's HOME. So business fails, they take your house. Just read your docs and be sure you understand that your personal property could be on the line if this business goes bad. If you can't read the docs clearly on this issue, and it's important to you, get an attorney to take a look on a fee basis. Don't bother asking the person selling this loan, branch banking people really only know how to sell them, not how they actually work (in my experience). \ Also, understand how the line actually accrues and calculates interest. There is typically no grace period as there is with credit cards. Any balance accrues interest. There may be minimum draw amounts. There may be fees for making draws. Be sure you understand all of this before getting in.

by Jay S

3 months ago

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