Corporate loan interest rate 2024

The interest rate on a business loan consists of two parts: the base rate and the interest margin agreed with the bank. The final price consists of the interest rate and the cost of servicing the loan. External financing may be needed at different stages of a business, and a business loan can be used to finance equipment, new premises or expansion, for example. It is particularly suitable for long-term investments and the loan usually lasts between 3 and 7 years. The terms of the loan are always agreed on a company-by-company basis, and the price depends on the company's financial situation, prospects and collateral.

Euribor and fixed rate

The interest rate on a corporate loan can be linked to the Euribor or fixed. Euribor is a reference rate between banks in the euro area that can change, for example, every 3, 6 or 12 months. The interest rate on a Euribor-linked corporate loan remains the same throughout the interest rate determination period. For example, the interest rate on a 12-month Euribor loan remains unchanged for 12 months, after which the reference rate is adjusted. The new interest rate will be in force again for the next 12 months.

The fixed interest rate remains the same for an agreed period, such as 3 or 5 years, which reduces the risk of rising interest rates. The fixed rate is usually slightly higher than the Euro rate, but it offers predictability and protection against rising interest rates.

Margin call

The margin on a business loan is the bank's share of the interest on the loan. The margin varies from customer to customer and is determined by the age of the company, its ability to pay, any defaults, other business and its future prospects. In addition to the margin, other costs, such as the cost of drawing down the loan and any service charges, also affect the total cost of the loan.

How to apply for a loan

You can apply for a business loan through Qred Bank's online service. By submitting your application, you will receive personalised service from our experts who will help you find the best financing solution for your business. To apply, you will need, for example, the latest financial statements, an audit report, if applicable, and an accounting run or interim financial statements if it is more than 6 months since the financial statements. For a new company, a business plan and three-year budgeting are required.

Interest rate risk and hedging

Interest rate risk arises from fluctuations in interest rates. A higher proportion of variable-rate debt increases the risk of higher interest rates and higher loan servicing costs. Interest rate hedging allows you to manage this risk. For example, an interest rate swap allows you to change the fixed to variable interest rate on a business loan, or vice versa. An interest rate cap limits interest rate rises to a certain maximum level, while an interest rate floor sets a range for the interest rate.

Repayment

The repayment of the loan will be tailored to your business so that it does not put too much strain on your business. The most common form of repayment is a straight-line repayment, where the repayment is always the same, but the interest rate decreases as the principal is reduced. If your ability to pay changes, you can negotiate with your bank to change the repayment schedule. If necessary, you can apply for a repayment holiday, where you only pay interest for a certain period. It is important to calculate the cost or use a business loan calculator.

If your company's solvency improves, you can negotiate an accelerated loan repayment or repay the whole loan at once. There are often fees for changes to the loan, so it's a good idea to find out what the costs will be.