Commercial Interest Rates
When you apply for a commercial, multifamily, investment property, or business loan through ICS, your loan is instantly reviewed. You complete one short application, receive multiple loan program options, through one single point of contact, ICS.
How Commercial Rates Work
Most commercial real estate and business loans are based off the Federal Prime Rate or Libor. The Federal Prime Rate is an excellent starting rate for A credit bankable borrowers. Bridge loans typically are 3% to 7% above the Prime Rate. SBA loans usually are 2% to 3% above the Prime Rate.
The prime rate is the interest rate that commercial banks charge their most credit-worthy customers. Generally, a bank's best customers consist of large corporations. The prime interest rate, or prime lending rate, is largely determined by the federal funds rate, which is the overnight rate that banks use to lend to one another. The prime rate is also important for individual borrowers, as the prime rate directly affects the lending rates available for a mortgage, small business loan or personal loan.
Federal Funds Rate
The federal funds rate is the rate at which depository institutions (banks) lend reserve balances to other banks on an overnight basis. Reserves are excess balances held at the Federal Reserve to maintain reserve requirements.
The fed funds rate is one of the most important interest rates in the U.S. economy since it affects monetary and financial conditions, which in turn have a bearing on critical aspects of the broad economy including employment, growth, and inflation. The fed funds rate also influences short term interest rates, albeit indirectly, for everything from home and auto loans to credit cards, as lenders often set their rates based on the prime lending rate. The prime lending rate is the lending rate at which banks charge their customers. The Federal Open Market Committee (FOMC) meets eight times a year, to set the fed funds rate, and uses open market operations to influence the supply of money to meet the target rate. A calendar of upcoming and past meetings as well as press releases from those meetings can be found here.
London Interbank Offered Rate (LIBOR)
LIBOR is an important rate used worldwide by financial institutions to determine the interest rate to be charged on various loans. LIBOR is based on five currencies: the U.S. dollar, euro, pound sterling, Japanese yen and Swiss franc. There are typically seven maturities for which LIBOR is quoted: overnight, one week, and one, two, three, six and 12 months. The most popular LIBOR rate is a three-month rate based on the U.S. dollar.