A larger number of community banks are offering commercial customers floating interest rates to remain competitive with larger institutions.
Many small businesses that have been unable to secure financing with larger banks in a tight credit environment have migrated to community banks in recent months. In an effort to provide more affordable small business banking products to owners, some local banks are removing floors on loans to offer floating rates that could hover around unprecedented lows, according to American Banker.
Some rates have fallen to as low as 1.99 percent, and many local banks are leading the drive to make loans as affordable as possible to stay in business, MidSouth Bancorp president and chief executive Rusty Cloutier told the news source.
"We cut our rates pretty good … to keep the business," Cloutier says. "It is cutthroat out here on getting business, it really is."
Many banks are considering offering floating rates following the Federal Reserve Board's announcement that it intends to keep rates low through late 2014. A recent Wells Fargo/Gallup survey reveals fewer small businesses had difficulty obtaining credit last year, and more are expected to apply for business credit lines as credit restrictions soften.