Current benchmarks and forecasts for small commercial bank loans
This report gives you a graphical tour of small business credit markets, including average rates, terms and other vital data. Knowing these norms will give you valuable leverage when negotiating for the best deal. Rates and terms will vary based on region, the health of a company and the value of its assets. Figures are revised as new reports become available, so check back at least once a month for updates. The report includes:
Current Interest Rates
Survey of Borrowers. A poll of more than 1,000 small companies by the National Federation of Independent Business. Figures reflect the average interest rate on new short-term loans. While figures aren’t as authoritative as the Federal Reserve survey of lenders (below), the NFIB's monthly poll is more timely, and its movements have closely approximated the government data.
Survey of Lenders. A quarterly survey of 400 banks by the Federal Reserve Board. The rates reflect commercial loans made by a broad variety of banks: domestic and foreign, large and small. It does not include independent finance companies. Figures reflect all loans in all risk categories of less than $1 million, broken down by size above and below the $100,000 mark.
Key Provisions and Terms
Where You Are Most Likely to Find.
The Lowest Rate. Compares the average rate on small commercial loans based on the type of institution—all domestic banks, large domestic, small domestic, and U.S. branches of foreign-based banks. Foreign banks tend to offer the lowest rates, while small domestic banks are usually highest.
The Longest Maturity. Compares the average maturity or interval between rate adjustments among the types of institutions listed above. A longer maturity is usually more desirable, especially when rates are rising, because it brings stability to your financial planning. In recent years, small domestic banks usually offered the longest maturity. Maturities at foreign-based banks were shortest.
A Call Provision. This allows
a banker to demand full payment of a loan ahead of schedule if you fail to make payments or specific business performance goals. As a rule, most borrowers would prefer a non-callable loan. In recent years, less than a third of the value of small commercial loans have included a call provision, but foreign-based banks are almost twice as likely to insist on one.
A Prepayment Penalty. This is a fee, often quite stiff, that banks charge if you pay off a loan early, which you might want to do if rates fall sharply. A prepayment penalty favors the banker, unless you get a substantial discount on the initial interest rate. Only a small fraction of recent loans have included this clause. If you’re offered a loan with one, ask if the bank will delete it.
Are Rates Rising or Falling. The NFIB asks members each month whether their most recent loan carries an interest rate higher or lower than the previous loan. The chart shows the net percentage reporting higher rates.
Harder/Easier to Get a Loan. This measure of sentiment among borrowers, derived from monthly NFIB data, asks whether they expect loans to be harder or easier to obtain in the coming three months.
Who Else is Borrowing. This measures demand for loans among NFIB members each month. Lower demand tends to favor borrowers. Figures show the percentage of companies borrowing at least once per quarter.
Is Demand Rising or Falling. This is how senior loan officers at 85 banks perceive demand from small companies, as reported to the Fed each quarter. Lower demand usually favors borrowers, but may also be a reaction to tighter terms or higher rates.
Will Terms Ease or Tighten. What senior bank lending officers expect to do in the coming months when it comes to the fine print like credit standards and maturities. Based on a quarterly Fed survey.