Before I start discussing the data, let me quickly explain the methodology. Boring alarms are going off….Here is a picture of Moby.
Finding average commercial interest rates offered by banks required more research and assumptions. Bank commercial rates vary from market to market and are based on a number of factors, including the prime interest rate, the risk premium required and the competitive market. I used historical data from the Wall Street Journal to determine the prime interest rate from 2002 to 2015 and then reviewed risk premium data provided by the World Bank. I then used local knowledge to estimate how the competitive environment affects local interest rates.
I reviewed January and December 504 rates over the period and then took an average of each to create a composite rate.
The commercial rate was determined by creating a composite rate by adding prime, plus the World Bank’s risk premium estimate and then adjusting the risk premium based on my knowledge of the local competitive environment. The 2014 and 2015 commercial risk premium is an assumption I made with the knowledge that a number of banks have dropped rates to historically low levels as a response to extreme competition.
I did some ciphering and voila, I could make a reasonable comparison to determine if, historically, the 504 is actually a good deal.
Sorry about the blah, blah, blahing…. Here is a close up if Moby.
And now to keep you reading, here is a provocative picture of Moby.
And now, Moby and his stogie…
Finally, here is another compendium of two more things that work in harmony for the betterment of a business owner (me)…