Stacks of coins with the letters LIBOR isolated on white backgroundMost of FLB’s business clients borrow money from commercial lenders, such as banks and credit unions.  If any of your loans are priced on the basis of LIBOR (London Interbank Offered Rate), you have probably heard that this is going to change.  The “sun will set” on LIBOR at the end of 2021, and lenders have already begun pricing new deals in terms of alternative rates, such as SOFR (Secured Overnight Financing Rate).

Now is a good time to look at your financing terms and understand whether your loan documents already provide for a transition to a non-LIBOR alternative.  If you have borrowed money within the past year or so, there is a good chance that this has already been addressed. However, older loans may not have any “default” alternative rate built in.  For example, if your loan documents call for LIBOR to be replaced with Prime Rate, be aware that this likely means that your interest rate will increase.  This is something you will need to discuss with your lender, and this may present you with a good opportunity to renegotiate terms.  This could be a simple loan modification or you may want to look at more comprehensive changes.

We suggest that you begin by speaking with your accounting and legal consultants, reviewing your current borrowing terms and closely monitoring communications from your lender.  Attorneys in FLB’s Banking & Finance Group are here to help you understand your options. Please contact Tim Charlesworth or one of our other Banking & Finance attorneys for assistance.


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