Financing -- Loans/Business Loan for a business with ideal qualification.
I am wondering how do banks determine what interest rate is determined for each small business looking for a loan. Is there a formula that takes into account the credit of the owner, the assets, alternative incomes, prime interest rate, some other indices?
Not a lot of science behind this, actually.
For the most part, the bank establishes a range of loan interest rates and communicates this info to the lenders.
The lenders then seek loan opportunities in the marketplace.
Based on the loan officer's review of your credit history, risk, etc., they will give you a "proposed" rate.
Then, after you fill out an application and give the bank all the info it requires to submit the loan app to its credit department, the credit people will determine if the loan proposed to you is reasonable, or you need to furnish more collateral or down payment, or need to pay a higher rate of interest to induce the bank to loan you money.
Simply put, in this market, you will probably be charged the highest rate that the bank thinks they can get away with.
Best defense if to make inquiries at many banks and credit unions to discuss your loan and let all of them know you will go to
the financial institution that gives you the best deal.