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yes. The interest you pay is the base rate (EURIBOR or LIBOR or similar)  plus the margin, but only the margin is income for the bank.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sat Mar 28th, 2009 at 12:57:10 PM EST
[ Parent ]
I've long wondered why banks do not do x% + warrants type of investing to get some upside on these types of investments. Banks would be able to do that more efficiently than VC companies that have a higher capital cost and must push for casino results. What we saw when we looked for (small) debt from banks for growing a company was that they wanted to increase rates astronomically.

HP started with a bank loan.

by rootless2 on Sat Mar 28th, 2009 at 01:06:07 PM EST
[ Parent ]
I've long wondered why banks do not do x% + warrants type of investing to get some upside on these types of investments.

Chris Cook has been suggesting revenue-sharing or production-sharing agreements which have both a reduced default risk and a share of the upside.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Migeru (migeru at eurotrib dot com) on Sat Mar 28th, 2009 at 03:07:29 PM EST
[ Parent ]
Well according to the leaked Barclays docs, that margin is bit higher.

Of course, you have to send your LIBOR to a detox center on the Canary Islands, otherwise it will get your whole portfolio sick.

Or just buy the whole damn money market house that was supplying your LIBOR, which ever looks better on the books.

When world history is written, Texas will appear as a long elaborate joke.

by Pinche Tejano on Sat Mar 28th, 2009 at 03:41:31 PM EST
[ Parent ]
margin for what? It depends on the risk. All margins are basically 1.5% more than what they were in mid/late 2007.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sat Mar 28th, 2009 at 03:48:38 PM EST
[ Parent ]
just wait, I am known for my clever tricks.

Decanted a few of the Barclays documents, take a gander yourself:

http://www.docstoc.com/docs/5046490/BarclaysValiha

When world history is written, Texas will appear as a long elaborate joke.

by Pinche Tejano on Sat Mar 28th, 2009 at 09:57:55 PM EST
[ Parent ]

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