New User | Need Help? | Forgot Password?
Forgot password or PIN? | Demo
Home / Commercial / Business Lending / How do banks price commercial loans?
At Fidelity Bank, we understand the importance of providing transparent and competitive pricing for our commercial loans. Our goal is to support the growth and success of businesses in the Lehigh Valley and Northeastern Pennsylvania (NEPA). Here’s a breakdown of how we price our commercial loans:
Prime Rate:Our commercial loan rates are often based on the prime rate, which is the interest rate that commercial banks charge their most creditworthy customers. This rate is influenced by the Federal Reserve’s monetary policy.
SOFR:For some loans, we use the Secured Overnight Financing Rate (SOFR) as a benchmark, reflecting global interest rates at which banks lend to each other.
Creditworthiness:We evaluate your creditworthiness through credit scores, financial statements, business plans, and your business’s history. Strong credit profiles may qualify for lower rates.
Loan-to-Value Ratio (LTV):The LTV ratio compares the loan amount to the appraised value of the collateral. Lower LTV ratios often result in more favorable interest rates.
Debt Service Coverage Ratio (DSCR):A higher DSCR, which measures your ability to service debt with your current cash flow, indicates lower risk and can lead to better loan terms.
Loan Amount:Our pricing structure may vary based on the size of the loan. Larger loans can benefit from economies of scale and different risk considerations.
Loan Duration:Interest rates may differ for short-term versus long-term loans, with longer-term loans typically carrying higher rates due to increased risk.
Economic Environment:We consider the overall economic environment, including inflation rates and local economic health, when pricing our loans.
Competitive Landscape:The level of competition among banks in NEPA can influence our loan pricing, ensuring you get competitive rates.
Funding Sources:Our cost of funds, including deposits and other borrowing costs, plays a crucial role in loan pricing. We aim to cover our cost of funds plus a margin.
Profit Margin:We add a margin to cover our operating costs and risk.
Customer Relationship:Long-term and comprehensive relationships with our customers can lead to more favorable loan terms. We value your entire banking relationship with us.
Compliance:We adhere to all regulatory requirements and capital adequacy ratios, which are integral to our loan pricing process.
At Fidelity Bank, we are committed to helping your business thrive with fair and transparent commercial loan pricing. Contact us today to discuss your specific needs and how we can support your business growth in NEPA.
Explore our foundational Commercial Banking Content:
What You Should Consider When You Apply for a Healthcare Business Loan
Understanding the Structure of a Sole Proprietorship
Understanding Commercial Loans: A Guide for Businesses in NEPA and the Lehigh Valley
Prepare to Submit a Startup business Loan Application
How do banks price commercial loans?
What Banks Consider When You Apply for a Healthcare Business Loan
For more information or questions, please contact us by phone at 1-800-388-4380 or email us at Fidelity@fddbank.com.
