Tag Archives: 504

Interest rate

Interest Rates and Your Loans and Investments

Interest rates are a hot topic right now. But how do they impact your current and future loans? Whether you’re a seasoned investor or business owner, understanding the mechanics of interest rates is critical. Only then can you make informed decisions.

Let’s break it down.

Cost to borrow money:

  • A loan’s interest rate determines how much it costs to borrow money. The interest rate determines the additional amount you pay on top of the principal.
  • Lower rates reduce your borrowing costs. As a result, your cash flow and profitability improve.

Value and growth of investments:

  • On the flip side, interest rates dictate the returns on investments. These include bonds, treasury bills, savings accounts and certificates of deposit (CD’s). Higher interest rates can mean better yields for investors.
  • Compounded interest rates accelerate the growth of these investments over time.
  • It is critical to compare returns against inflation. If inflation outpaces interest rates, your purchasing power diminishes.

Key Factors to Know about Interest Rates:

•Not every loan is dependent on the Fed rate or the prime rate. While many loans are influenced by Federal Reserve policies, others are pegged to different benchmarks. These include the SOFR (Secured Overnight Financing Right), swap rates or even lender-specific indices.

The prime rate is often used as a baseline for commercial lines, with an additional margin based on borrower risk. (Prime +1.5 for example).

• Fixed vs. Variable Rates

  • Fixed rate loans lock in your interest rate for a part of the life of the loan. This provides stability, but can be less advantageous if market rates drop significantly.
  • Variable rates fluctuate with market conditions and are often readjusted quarterly. While they offer savings during low-rate environments, they can become costly when rates rise.

FAQS about Interest Rates:

Q: I have a fixed rate mortgage or business loan. Should I be concerned about interest rates?

A: Not necessarily. Fixed rate loans shield you from market volatility; your payments remain constant. However, if the rates drop significantly lower than your fixed rate, it might be a good idea to explore refinancing. At GRP Capital, we can help you assess whether refinancing aligns with your long-term goals and global cash flow.

Q: Are variable rate loans risky?

A: Variable rate loans can be advantageous when interest rates are low but require careful planning for potential increases in payments during high-rate periods.

  • A $1 million loan at 4% variable interest would cost $40,000 annually in interest payments. If the rate increases to 6%, that jumps to $60,000, a significant cash flow consideration.
  • Business owners who prefer predictable expenses often opt for fixed rate loans despite potentially higher costs during lower rate climates.

Q: How do higher interest rates affect my ability to secure financing?

A Higher interest rates increase borrowing costs. They may also tighten lending criteria, as lenders assess higher risks. This makes it even more important to work with experienced professionals who can identity competitive financing options tailed to your needs.

Navigating the complexities of financing in today’s fluctuating rate environment can be challenging. But that’s where we come in.

At GRP Capital:

  • We specialize in matching client with lenders who understand their unique projects.
  • Our expertise spans acquisitions, refinancing and construction financing across various industries.
  • We prioritize solutions that balance competitive terms with sufficient cash flow for long-term success.

Whether you are looking to refinance existing debt or secure funding for growth opportunities, our GRP Capital team is here to guide you every step of the way. Let’s discuss how we can help you achieve your business goals.

Working together on SBA 504 loans

SBA 504 Loans for Hospitality

Once again, Ryan Dumas has helped a client close a hotel loan, this one in an East Coast resort location.

Ryan’s client, an experienced hotel owner, was prepared to purchase a hotel. This property was not too far from a current one he already owns. Our client knows this community well and had been keeping his eye on this hotel. He believed that the hotel had the potential to be even more profitable with strategic, experienced management, which he had the time and skills to provide.

Our in-house underwriting and credit analysis team recommended an SBA 504 loan to our client. Many lenders are still skittish about hospitality loans. However, the guaranty of one of the SBA 504 loans is enticing to a greater number of lenders. Working with a certified development company as well as a senior lender, our team was able to shepherd the loan through this complex process.

Our client has taken possession of his new hotel. His strong business skills should allow him to capture even more of this resort market. He remarked, “I know you worked very hard to process my loan.” During the loan processing, we spoke to him every day. So we are going to miss him while he’s busy with his new business!

FAQs on SBA 504 Loans:

• What can an SBA 504 Loan be used for? Purchase of a business or equipment as well as renovation/construction for an existing business. At this time, SBA 504 loans cannot be used for refinancing.

• What is a Certified Development Company (CDC)? In order to apply for an SBA 504 loan, borrowers must work with both a CDC and a senior lender. The CDC has to officially submit the loan to the SBA for approval. In addition, the CDC also approves the lender. Typically the CDC and the lender each have their own underwriting processes, which happen simultaneously.

• How Complicated are SBA 504 loans? To be honest, there are a lot of moving parts. Essentially, you are applying simultaneously for two loans and closing them at the same time. Having GRP Capital to assist in the large numbers of document collections saves clients a huge amount of time and hassle. In addition, GRP Capital already has positive working relationships with many CDC’s and knows which lenders are willing to make hospitality loans.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase or engage in construction, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.