“Note: Since this was written, the prime interest rate has dropped to 4% and further rate cuts are possible.-Chris”
One item not receiving a great deal of attention through the financial crisis is the fed’s action causing the prime interest rate to drop from 5% to 4.5%.
Many business loans are prime-based, so this will be a welcome relief for many business owners. In addition, prime interest rates are very low for those who qualify. Banks are hungry to make loans in their narrower preferred categories. SBA loans are still being made (albeit with tougher rules) and funding certain business acquisitions and franchise purchases are in many lenders’ sweet spot
These are advantageous times to buy a business since multiples are down and lenders will be your willing due diligence partner to make sure their monies are safe.
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The larger issue will be the continued movement of the “One Year LIBOR”. This is the rate that so many U.S. Adjustable Rate Mortgages(ARM)are based. The ARM doesn’t start moving until after the “quiet” period in your mortgage. Continued thawing in the lending markets should keep this rate down over the next 90 to 120 days. This could be a hidden gift or another blow to millions of cash strapped American homeowners. If you have an ARM, you will want to check what lending rate is used for the base rate; you also need to check when the rate is allowed to move – usually either three or five years after the loan was closed. Most ARMs will be based on the One Year LIBOR as quoted 45 days prior to the ending of “quiet” period of your mortgage. You can find this rate in the Wall Street Journal.