As we start 2024 there is a lot of eager anticipation around whether the Fed will start to lower interest rates this year. Most of what we’re reading predicts anywhere from three to six 25bps rate decreases but there is a lot of debate and uncertainty around that. There is also a lot of debate about when the decreases may be implemented. Some say as soon as March, others think it will not happen until the summer. There was also a mixed inflation report that came out on January 11th, 2024 that probably does not change the Fed’s projections for future rate decreases but may alter when they occur.
So what should borrowers do that have maturing loans? Should they wait for rates to fall? What if they don’t, or what if it takes too long? Well, in today’s version of Insights we would like to highlight a specialty bridge loan program that was just launched that alleviates this exact problem.
Today we caught up with a private bridge lender that offers short term loans of 1 to 3 years. Their newly originated loans are now made at a floating rate of interest that has a floor rate 100bps below the current market rates. This way, if the loan closes, and rates subsequently fall, borrowers get to benefit from the rate reduction. In contrast, most floating rate lenders will set a floor at the interest rate on the day of closing.
Here is a high- level snapshot of their loan program:
Loan Amounts: $1,000,000 – $20,000,000
Term: 1 – 3 years
Amortization: Interest Only
LTV: up to 75%
Interest Rate: Floating Rate over WSJ Prime, floored 100bps below prevailing rate at close
Guaranty: Non Recourse Available
The major benefit to this program is the potential for riding the market down with the Fed. Please reach out to us if this financing program is of interest to you.
About Schelin Uldricks & Co.
Schelin Uldricks & Co. is a firm offering investment banking services with a focus on providing capital solutions to real estate companies and other mid-sized businesses.
Headquartered in Huntington Beach, CA, Schelin Uldricks & Co. embodies a progressive entrepreneurial culture focused on integrity, transparency, execution, and ingenuity. The founding partners bring over 25 years of collective capital markets experience in investment banking, private equity, and real estate finance. The company offers a broad array of services, including debt and equity placement, M&A, GP advisory, divestitures, and financial restructuring.