Rates, Rates, Rates, Planning, Careers, and who was Roger Donlon?
It was a good economic week, so instead of telling you what went up and what went down, let’s focus on something that actually might be useful to you…
Interest Rates
Its been a while since I reviewed interest rates, so let’s take a look.
Business CD Rates – any amounts.
5.4% at Marcus by Goldman Sachs – 14-month
5.3% at BMO Alto – 12-month
Business Money Market Rates
The best deals involve moving more than just some money into a money market account. They also involve opening ancillary checking accounts and other qualifying criteria. US Bank currently does that, but they offer 4.6% on a minimum balance of $25,000. Just be prepared to jump through some hoops.
And every business owner I know doesn’t need more hoops to jump through.
3.45% First Internet Bank on any balance
5.46% on balances over $5 million
SBA 504 loan rate
Those of you who received a 25-year Small Business Administration loan in November of 2020 are still crowing about your 2.55% rate.
That’s changed a bit. If you were to fund today, you would get a rate of 6.36% for that same loan.
Keep in mind that this is only the SBA portion. When you get financing from the SBA, that is 40% of your total loan amount. Your bank will do 50%, and you are expected to put in 10%.
I’m just talking commercial real estate, owner-occupied of 51% or higher and NOT special purpose property.
The SBA will do special purpose property but will require 15% from the borrower.
For example, if you want to purchase a property for your business for $2,500,000 that is not a single-use or special-purpose property, it will play out as follows:
You, as the borrower, would have to put $250,000 into the deal.
The SBA would put in $1,000,000 and your bank would put in $1,250,000.
The SBA loan rate would be 6.36% for 25 years.
The bank rate would depend on the bank but would likely be between 7% to 8%, assuming you could find a 25-year loan for a commercial – NOT apartment – property.
Many banks will do a 10-year or 20-year term in that rate range.
Business Lines of Credit
Most bank lines of credit to businesses are based on the Prime Rate as listed in the Wall Street Journal.
Historically, the prime rate was the rate banks gave their best borrowers, and it would vary from bank to bank.
As time went on, the average prime rate was based on the Fed Funds rate… oh, never mind. Just know that the Wall Street Journal publishes a prime rate and that’s what most banks use in loan agreements.
Just be aware that a small bank could have their “prime” rate set differently, so be aware of that.
Prime is 8.5%.
When lending to businesses, banks will charge in the range of Prime +/- 2 percentage points, depending on their own internal risk rating system.
As the fed lowers rates, we expect prime will also decrease, which will directly impact the bottom line of your business in a good way.
It’s All About Planning
I have said many times that the better plan you have, the less anxiety you will feel.
Whenever I was getting nervous about the plan to buy a bank, I just went back, reviewed our plan, and either felt much better or made adjustments.
Assuming you are in California – and if you are not, breathe a sigh of relief and go to the next section – what are you doing to prepare for the wage increase of fast-food workers?
“I don’t run a restaurant,” you say.
No, but if you are paying less than $20/hour, your warehouse worker, copier delivery person, or janitorial schlep may have a career change in the near future.
Conversely, there may be some newly unemployed fast-food workers to hire.
Speaking of careers…
When I was teaching finance, I would ask my students where they worked.
The answers varied, and invariably, it was almost sheepishly that they would say McDonald’s or Walmart. They were almost embarrassed.
I would then ask who worked at Fortune 50 companies, and maybe the Amazon folks would raise their hands.
I would emphasize to the Walmart and McDonald’s workers that what they are getting is the experience of working at a Fortune 50 company.
And yes, some are franchised, so technically, it’s not a McDonald 's-owned restaurant, but you still have the standards of the Franchisor.
This past week, it came out that the wage and stock package for a Walmart store manager can exceed $400,000 per year. That’s not a typo.
The Super Walmarts have over 300 employees, and it takes skill and experience to manage a store of that size, and they are rewarded for it.
The average annual base salary for a Walmart store manager is $128,000.
And a college degree is not required. So maybe an entry level job at Walmart isn’t all bad…
So, when you get a job applicant that has Walmart on their resume, you probably should at least have a meeting.
After all, that person will have received training from the largest company in the world in both revenue and number of employees.
Who was Roger Donlon?
Born in Saugerties, New York, in 1934, the 8th of 10 children. His father worked at a coal and lumber yard and his mother was a homemaker.
“A strong father and mother set our compasses for life in various ways… and they both instilled a need to serve.”
He joined the US Air Force in 1953 for flight school, but failed eye tests, then applied and was admitted to West Point in 1955. He left West Point in 1957, but then re-enlisted in the army in 1958 and went to Officer Candidate School.
In 1963, he joined the Special Forces, earning his Green Beret.
In July 1964, he was a captain in charge of an outpost in Vietnam with 11 other US soldiers and 300 South Vietnamese and local militia. As it turned out, only about 100 of them were loyal to the Americans.
Early in the morning – middle of the night, really – a force of 800 North Vietnamese attacked.
Without his leadership, the outpost would have fallen. You can read all about it in his Medal of Honor citation here. And I suggest you do.
He was the first recipient of the Medal of Honor in the Vietnam War.
He retired as a colonel in 1988.
In his retirement, he wrote two books about his experiences and served working with Veteran’s groups, including Wreaths Across America.
He passed away last week, just days shy of his 90th birthday.
“The casualties of war are not limited to the battlefield,” he said in 2022.
Roger Donlon, by all accounts, was an average American. But what he did that day, and likely more times since, was exceptional. But that’s what it means to serve.
Surveys repeatedly show that companies that support local charities by having their employees involved in service to others are more productive. For your next team-building activity, contact a local non-profit and see what your employees can do to give back. You won’t earn the Medal of Honor, but you will make a difference.
And that is the essence of America.
Adam
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