Interest Rates for Small Businesses
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According to a loan officer at a local bank with strong ties to the community, a small business can expect an interest rate of 10.25 percent today. This is based on the prime rate of 8.75 percent at the bank plus a percentage for the risk associated with loaning funds to a small business. The prime rate is the rate that institutions charge their best customers, which are those who have the lowest amount of risk associated with their transactions. Since the business in question does not have a history with the bank and, as a small business, presents some amount of risk in this transaction, the bank is adding a premium to the transaction.The prime rate that a bank charges is based, in turn, the discount rate or the federal funds rate; these are rates that are charged by the Fed to member banks, or the rates that member banks charge each other for overnight transactions. These rates are not available to individual bank customers. The prime rate represents the minimum amount of profit which the banks realize since it is what they charge their customers over and above what they are paying for funds. The logic continues as the risk associated with t
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Some common words found in the essay are:
, prime rate, risk associated, rate return, 1025 percent, rate 1025 percent, risk associated transactions, rate 1025, raise capital, requires company, associated transactions, inflation account, funds rate,
Approximate Word count = 779
Approximate Pages = 3 (250 words per page)
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