What kind of returns do private loans produce? Is the interest rate fixed?
The typical interest rate for a direct private loan ranges from 10% – 16% depending upon the time frame, the purpose, the loan-to-value ratio, the exit strategy, the quality of the Borrowers personal guarantee(s) and other factors. The interest rate can be either fixed or floating, depending upon the way the transaction has been structured. If the interest rate is structured to be a floating rate, we would generally set a floor on the rate to protect the returns in the event the benchmark rate (i.e. the Prime Rate) were to adjust downward, and increased yield is earned if the benchmark adjusts upward.
