The guidance used to write these examples is the Business Lending Pricing Guide found on netinterest > Bank Rates. 

Use of the Client Profitability & Pricing (CPP) tool can also help determine how much of a markup should be made – especially for clients with limited or no deposit relationship. For a library of helpful CPP resources see the CPP category in HelpU.

As noted in the guidelines, the pricing range assumes the best clients/strongest loans would be offered the lowest rates (top of the chart below). Most average clients would fall in the mid-point, with only the weaker credits priced well above the optimal rate.  

These following factors should be considered when pricing the loan:

• Loan type, 
• Debt service coverage ratio (DSCR), 
• Global DSCR/Debt to Income (DTI), 
• Credit score, 
• Loan to value (LTV), 
• Term, and 
• Related.  

Selection of a rate should be documented in your loan approval (either in a standard report memo or narrative in Abrigo).

*The rates below are EXAMPLES ONLY

Example 1:

A small business client with a Beacon score of 730, LTV of 70%, wants a 5/1 ARM on their owner occupied (OO) office building with a DSCR of 1.80x, requesting a 15-year term and has a good deposit relationship:

• Starting with the price guide matrix, you would start with a base rate of 6.85% from the above.
• Since key criteria are policy compliant (see Small Business Policy), you start the negotiation with a rate above 6.85%, but given the better than required DSCR, LTV, and shorter-term, would be able to price at the bottom if needed to win the deal.

Example 2:

A commercial client with a Beacon score of 730, LTV of 80%, wants a 5/1 ARM on an income producing property, DSCR is 1.25x, requesting a 20 year term, limited or no deposits:

• Starting with the price guide matrix, you would start with a base rate of 6.50% from the above.
• Since this is Non-Owner Occupied (NOO), you would then add 0.50%, so your range starts at 7.00%.
• Since the DSCR is the minimum needed under policy, the LTV and term are at the normal limits, you should price higher than the minimum.  In this case, a rate of 7.50% would make sense.
• Lastly, with no or limited deposits, the rate should be increased further, to 8.00% for example.

There are 2 possible scenarios for pricing business equipment using the Business Loan Pricing Guide charts: 

• Applicants who qualify for the current promotional rates - Use the Business Non-Real Estate Loans: Business Equipment Special Rate  
• Applicants who do not - Use the Business Non-Real Estate Loans: All Collateral Types

To qualify for the Business Equipment Special Rate:

• For for top clients/prospects ONLY
• $25K minimum loan amount. Note: Exceptions are allowable but must be well documented in Abrigo as part of approval.
• Useful life must be 2 years or longer than amortization period.

Example 1:

An applicant meeting the above criteria for a Business Equipment Special Rate, is refinancing equipment debt with us (used equipment), and would like a 5 year amortization:

• The loan would be priced at 7.00% for 60 months.

*The rates below are EXAMPLES ONLY

Example 2:

An applicant is financing a one-time equipment purchase with a $15,000 loan amount, has a Beacon score of 750, and is requesting an LTV of 80%:

• The loan amount is too small to qualify for the special rate, so you would use the “All Collateral Types” guidance.
• Considering the LTV and Beacon score provided, you would price with a fixed rate of 7.075%.

*The rates below are EXAMPLES ONLY