• Business
  • Business News
  • Video
  • Contact
Aycliffe Today
Aycliffe Today
  • Business
  • Business News
  • Video
  • Contact
  • Follow
    • Facebook
    • Twitter
    • Youtube
Home
Business

Advice: Interest rate protection for businesses

June 3rd, 2016 Martin Walker Business 0 comments 0

Mark Whitaker from Aycliffe firm Commercial Expert brings some useful financial advice…

Large corporate businesses have been using IRP for many years to help with planning.

But, more recently, banks started making this available at a lower borrowing level to smaller, less sophisticated borrowers.

Whilst this has caused some issues (as reported in the press) it is right, at times, for a borrower to protect his cash flow using IRP.

There are a few things to consider:

• Firstly, there is no such thing as a fantastic deal…the client is merely buying a market expectation of what is likely to happen with interest rates.

• If a business has a “pain threshold” at which interest costs become critical for the continuance of the business, then IRP is something which should be considered.

For example, a property investment company:
• £1.5m portfolio, net rent £75k p.a.
• £1m borrowing, 3% above base rate – interest cost £35k p.a.
• Interest currently comfortably met
• Base rate rises to 5%, increasing interest paid to 8%.
• Interest cost now £80k and the business can’t cover interest.
• Be aware of possible break costs if lending is repaid early
• Take advice from your professional advisors. Ensure you understand what you are getting into.
• There are specialist firms who can advise on hedges and overview deals being offered. If debt is significant, such advice maybe worth considering.
• If IRP is taken up, the risk of interest rate fluctuations is removed and the bank may reflect this is a slightly reduced margin.

Mark Whitaker
Advisory board member
Commercial Expert
www.commercialexpert.co.uk

 

Share it!

Facebook Twitter Google+ LinkedIn Pinterest
Next article Gym members inspired by Emily trek 22 miles for charity
Previous article Aycliffe runners enjoy race success

Related News

Business

NC Group: Building the future workforce of Aycliffe’s engineering sector

Aycliffe Business Park is home to hundreds of thriving manufacturing and engineering businesses – but with...
Business

How Senstronics culture has nurtured life-changing career for Jack

From delivering pizzas in Stockton to managing a high-tech maintenance team, Jack Rickaby’s journey is...
Business

Strategic expansion for family firm as industrial suppliers set up shop in Aycliffe

A fasteners and industrial supplies business with a proud family history is investing in the future by...

LATEST VIDEO

This week on A.T

Sep 23rd 1:40 PM
Community

Fun and Food scheme benefits thousands of children in County Durham

Sep 22nd 4:18 PM
Business

NC Group: Building the future workforce of Aycliffe’s engineering sector

Sep 18th 4:49 PM
Sport

Newton Aycliffe Juniors round-up

Sep 18th 9:44 AM
Business

How Senstronics culture has nurtured life-changing career for Jack

Sep 17th 12:47 PM
Community

Helping to create thriving communities across County Durham

Sep 17th 10:30 AM
Business

Strategic expansion for family firm as industrial suppliers set up shop in Aycliffe

Sep 16th 9:01 PM
Sport

Aycliffe prepare for FA Trophy trip

Sep 16th 3:09 PM
News

Chaos reigns as Durham County Council announces new cabinet after just 100 days

Sep 16th 10:47 AM
Sport

Aycliffe Cricket round-up

Sep 15th 4:27 PM
Community

Newton Aycliffe school children celebrating new facilities

Recommend
Follow @AycliffeToday
  • Business
  • Business News
  • Video
  • Contact
  • Back to top
© Aycliffe Today 2019. All rights reserved.
Developed by Thrive

Get our latest news direct to your inbox every Friday - subscribe to our free e-newsletter today.

Subscribe Now