HART’s mind works in mysterious ways ….
I have kept a record of every Prime Rate change since January 1, 1986. I guess I’m anal that way. There are many times working on year end financial statements that I have to accrue interest on loan balances. Quite contrary to common belief .. “term loan rates” are not that common for business. Mind you, I shouldn’t say that as if I am making a fact, but rather an observation. Usually with my experience, when there are company loans that involve general security arrangements, I have noted that these loans tend to be VARIABLE in nature – in this case .. “Prime plus”. These loans would include demand operating loans, general working capital loans, etc etc. The term loans that usually have specific terms of repayment and interest rates are those usually secured by a specific asset or group of assets that has a serial number – such as automobile financing, equipment loans, etc etc. These are not always the case, just “in General” and in my humble opinion.
Anyway, sometimes you need to accrue interest or estimate what portion of a blended interest and principal loan payment is. Knowing the rate of interest is usually helpful. For instance, if there is a demand loan that is being charged “Prime plus 2.5%” and the last payment was taken out on the 5th of the month, I might accrue interest from the 6th of the month to the end of the month in the financial statements – but I need to know what Prime rate is. That’s where my recap comes into good use.
(Q) WHAT IS THE PRIME RATE?
(A) The Prime Rate is the interest rate that commercial banks charge their most creditworthy borrowers, such as large corporations. The Prime Rate is usually a couple of interest points higher than the Bank of Canada Rate. Usually the Bank of Canada will adjust the rate and it’s up to the major financial institutions to decide to follow.
(Q) WHAT IS THE BANK OF CANADA RATE?
(A) It conveys the average interest rate that the Bank of Canada wants to see major financial institutions charge when they lend each other money for one day, or “overnight.” Canadian banks routinely borrow and lend money between themselves overnight, in order to balance their daily transactions.
(Q) IS ‘THE BANK’S RATE” SAME AS “PRIME RATE”?
(A) First of all, it usally is “TD Canada Trust’s Prime Rate”, “Bank of Nova Scotia’s Prime Rate”, “Royal Bank of Canada’s Prime Rate”, etc etc. Usually, when someone mentions “The Bank’s Prime Rate” (in my experience) they are probably quoting terms in their Business Development Bank of Canada (BDC) loan. They will often lend Canadian businesses money where other banking and financial institutions will not. Their interest rates are usually higher, because they refer to “THE BANK’S RATE” in most cases, it is calculated like this:
NORMAL bank’s Prime Rate + 2% = BDC “Bank’s Rate”
So, if they lend you money at “The Bank Rate plus 2% .. it probably is really the same as getting a loan for Prime Rate plus 4%. (These rates are only guestimates and may not be accurate)
ANYWAY .. Back to my story!
So I was looking at my C:DATAEXCEL folder on my computer while I was making a backup today, and saw my Prime Rate Recap file. I figured I would update it, because the last update was made up to March 31, 2005. I first tried HART’s Bookmarks and like I always do, performed a few ‘Net searches. Then.. I FOUND SOMETHING!
Today – there is news….. Did anybody know that? Did you hear about it? Did you read about it? I didn’t .. I guess if it was out there, I was probably more concerned with the 2005 Tim Hortons Canadian Curling Trials out in Halifax. Anyway .. here’s the news..
Tue Dec 6, 2005 9:05 AM ET
TORONTO, Dec 6 (Reuters) – Royal Bank of Canada (RY.TO: Quote, Profile, Research) said on Tuesday it will raise its prime lending rate to 5 percent from 4.75 percent, beginning Wednesday.
The move follows the Bank of Canada’s rate hike, which took the benchmark overnight rate to 3.25 percent from 3 percent.
The prime rate is the rate charged by banks on loans to their best customers.
I AM NOW OFFERING YOU MY EXCEL TEMPLATE OF ALL CANADIAN HISTORICAL PRIME RATES SINCE JANUARY 1, 1986 … FREE FOR THE TAKING! EXCLUSIVE! WooHoo! Yippee! All you have to do is download this to your own computer, and periodically call the Royal Bank of Canada at 1-800-76-2511 and ask them to update the Royal Bank Prime rates for you!
I am currently using Microsoft Excel for Windows 95, version 7.0 as my preferred spreadsheet program and version. You can change the text of anything I use to suit your own needs .. it is just a guideline. If you feel this has helped you, feel free to glorify my greatness and usefulness in this world (or join HART’s Coffee Club – see sidebar)
1-800-HART’s HISTORICAL PRIME RATE RECAP —> OPEN to view, SAVE to Disk ..
“UPDATE March 21, 2006”
See Updated Spreadsheet News