Over the last 12 months to Sept. 30, commercial loans in the U.S. have become more expensive for smaller borrowers and less expensive for larger, riskier borrowers.
According to data collected by S&P Global Market Intelligence on nonsyndicated commercial loan portfolios, loan spreads on London Interbank Offered Rate-linked commercial loans — which tend to be offered to larger borrowers — have increased slightly or remained flat for borrowers with a risk rating between 5 and 10, but have actually decreased for borrowers rated 11 or 12. In September, the average spread above LIBOR for a new loan for a 5-rated borrower was 206 basis points, compared to 183 basis points a year earlier. In contrast, the average spread for a 12-rated borrower was 272 basis points in September, 19 basis points lower than it was a year before.
For loans tied to the Prime rate — which tend to go to smaller borrowers — interest rate spreads have largely increased across the board year over year. In September, the average spread on a prime-linked loan to a 5-rated borrower was 109 basis points, compared to 102 basis points a year earlier. Similarly, the average spread for a 12-rated borrower was 171 basis points in September, 20 basis points higher than it was in September 2016.
S&P Global Market Intelligence aligns each participating bank's internal risk ranking to a 16-point risk scale with 1 being the most creditworthy and 12 being the lowest origination grade. Grades beyond 12 are in various states of default and delinquency. Since generally only 3% of loans originated are rated between a 1 and 4, this analysis focuses only on those loans ranked between 5 and 12.
Data is collected by S&P Global Market Intelligence from select participating bank lenders active in the commercial & industrial loan space. Coverage may change over time.

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