Today's LIBOR Rates
1 M |
0.25781 |
 |
3 M |
0.29281 |
|
6 M |
0.49363 |
|
1 YR |
0.83488 |
|
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March 28, 2010
LIBOR literally and financially opens up the world to a small business owner. It turns a local financial request into an internationally appealing asset. A LIBOR-based small business loan can be bought and sold around the world. Like all financial instruments, the more appeal it has on the secondary market, the more liquid it is, resulting in better rates for borrowers (as opposed to a small bank’s Prime rate).
LIBOR based pricing (specifically the shortest available duration, the one-month LIBOR) is usually more favorable to the small business owner. Compare a loan at one-month LIBOR plus 2.75% (an actual rate of approximately 3.00%) or a loan at one-year LIBOR plus 2.50% (approximately 3.50%) to a loan at Prime plus .50% (approximately 3.75%). The potential negative: LIBOR rates can become more volatile if banks’ economic outlook turns gloomy and they boost their interbank rates, the basis of LIBOR. Small businesses would have to choose the immediate and tangible rewards of interest rates based on currently low LIBOR rates in exchange for the possible risk of rising LIBOR. Business should check for loans that do not have a prepayment penalty in case they want to exit should rates jolt. If surging rates are apparent, loans based on longer durations of LIBOR (three-month LIBOR, six-month LIBOR) typically offer a less volatile interest rate benchmark.
At LIBORATED.com, we believe the rewards of loans based on a short-term LIBOR index clearly outweigh the risk and discomfort over potential rate volatility. Large and/or international banks such as BNP Paribas’ Bank of the West, HSBC, UBS, Credit Suisse, Wells Fargo, and Citibank offer LIBOR-based loans. SBA loans can be LIBOR based. As globalization continues in the financial sector, LIBOR is dominating and here to stay for the foreseeable future. This is all the more reason that small business owners should become LIBORATED.