Today’s email is short, sweet and to the point, just like this way to save on practice debt. There is a lot of chatter about refinancing with lower interest rates and replacing practice debt with EIDL loan proceeds, but I have a simpler strategies ODs with higher interest rate debt should try first: call your bank.
The lending environment for banks is tough today—interest rates are low and while things have gotten better in the last few months, banks’ loan loss reserves (the amount they have to set aside for bad debt) is still pretty high. And with ultra competitive government debt options like PPP and EIDL loans for small businesses, they are not interested in losing existing performing (low risk/paying) loans.
In the past 3 months, I’ve advised my clients with practice loans over 4% (equipment, build out, purchase) to simply call their banker and ask them to lower the rate. We’re batting 1000- every single client who’s called has received a rate adjustment—all in the 3% range. Less than 3.75% to be more specific.
Rates are ticking up a little each week—my husband is in corporate bank specifically working with clients on fixing their interest rates and is constantly updating me on the LIBOR transition to SOFR and fun things like that—and if you still have a higher rate loan out there, before you refinance or consider EIDL loans as your best option, simply call your bank. You might be pleasantly surprised!
The improvement I’ve seen lately are all practice debt, but if you have a higher interest rate real estate loan or mortgage, it’s worth the 5 minutes to make the call. As my mother always says, the worst they can say is no- your banking relationship won’t be affected by asking.
Good luck, and do me a favor- if you do get your rate adjusted, let me know the old and new terms? It helps me frame what the bigger market looks like for your fellow ODs.