Embedded Floor in Your Loan?
Strategies to deal with this free gift to your lender
Embedded floors can increase your risk and your interest expense. Lenders have begun limiting their commercial customers from accessing the full extent of low market-based borrowing base rates, such as LIBOR. This policy pushes the lender’s risk onto you, and it’s not related to your own creditworthiness.
But, there are strategies that can be applied to mitigate this dubious policy.