Private asset-based lender line of credit rates - what would you expect to see?

We recently did a debt deal with a bank secured by IP (we don't have inventory) that had 1 point closing, 1 point at the end of the term, and prime plus 2.0% annual rate. Plus 2.5% warrant coverage. Yes, that was a different deal than you have, but we looked at bank and non-bank lenders and got similar pricing from others.
Your deal looks like very expensive money. Do you have any ability to get a second bid? With no alternatives you have nothing to negotiate with (I know you know that) and the ability to negotiate with confidence can mean a lot of $ saved. This just feels like a really tough deal. I'm sure you wouldn't be looking at that if you had a lot of alternatives, but keep looking for other stones to turn over.

We used a private ABL around 2005. Interest was at max usury rate: 24%.

We are were finally able to get a sweet-heart loan, with a PG by a billionaire for 8%. That enabled us to a) grow, and b) pay the loan off, within terms which then permitted up to grow again.

If we weren't able to get that sweet-heart loan, we would have gone out of business or at the very least, not grown much (some of the limits on growth was the way in which the principals ran the business and not totally from the stifling cost of money)..

Are you earning enough to service this stuff?

I think the rates depend up the financials of the company. If you are losing money with a long ramp to reach profitability and not backed by a funding source (such as a VC), you can see rates of 2% per month for a factoring type of arrangement plus other fees.

If you are making money but need the funds for working capital or are VC backed then the rates are in the prime plus 3 to 5%.

Best
Joan

If the Private Lender is an established commercial finance company they will want to make sure that the "family loan" is subordinate to the new financing. If the family loan is informal they may have not filed a UCC-1 to secure their position.

Generally speaking, debt financing based only on inventory is very difficult to obtain. Only a few lenders in the US will do it - unless there is a considerable dollar amount < $10M and the borrower has great financials.

Opiners will bemoan the cost of funds, but I would ask you this; would you lend your neighbor $10,000 with the chance of losing it all for only $300.00? Most would say no way.

To specifically answer the question, if you have a lender that will actually fund the deal as is at the terms described, my experience says it's a fair deal in the current economic marketplace. A tough decision for the borrower, I can only speak to the lending conditions as I see them cross my desk daily. You could shave some percentages, but your only leverage is the strength of your balance sheet. If it's strong and the owner has a high FICO then it's worth shopping. Otherwise a deal like this will take a big loop around and end up right back at the same lender becuase everyone knows they are the only ones who might do it.