Input on rate for a commercial loan

August 30, 2023

by a searcher from University of California, Berkeley - Haas School of Business in Seattle, WA, USA

Hi,

I am working on a bolt-on acquisition. The first-rate quote I received from a bank was WSJ Prime +1.75%. Where does this rate fall on the range of low to high compared to the current market?

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Reply by a searcher
in Barcelona, Spain

I do not have experience in the US, however a margin over the interbank rate of 1.75% does not seem like a lot. What you have to bear in mind is that investors typically look for 30% IRR returns, hence paying 10% on a loan is worth the cost, you drastically reduce the WACC in the valuation of the transaction.

Reply by a searcher
in Boston, MA, USA

Hard to give input without more context. How many turns of debt? What's the loan term? Does it have a PG? What type/size of business?

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