What does the loan market hold for non-profits in 2013? In previous years, using a swap as a hedging product has put many non-profits in a bad position due to the high exit fees and the term of the swap versus the term of the loan. In today’s market, many analysts believe that swaps may be more beneficial to clients in comparison to other fixed rate loans, given that swaps match specific loan terms.
In the past, non-profits’ have set up 10 year loan terms and 30 year swap terms. When their 10 year loan is up, they are left with 20 years on their swap. Exiting a 20 year swap can cost millions of dollars. The problem has been that clients were not given the proper information on the risks associated with setting up a swap for a longer term than their loan. Swaps ultimately have a very bad name and have consequently cost non-profits millions.
Swaps, however, are not the enemy. I have yet to come in contact with a non-profit trying to exit a swap that was set out for the exact term of their loan. Thus, it seems the enemy is lack of information on swap risk. Swaps can actually be an excellent hedging product, offering non-profit clients extremely low interest rates while providing the security of a fixed rate loan. The most important thing to remember is to only set a swap out for the exact term of the loan. 2013 actually has a pretty good outlook for non-profits to use swaps to fix variable rate debt. Quite a turn round from the last few years!
Since it’s the winter season, we are continuing to volunteer at Disabled Sports on the mountain every weekend and this weekend was no exception. Our marketing director taught an 8 yr old girl who has Aspergers to snowboard! Although the little girl was frustrated with falling all of the time, she absolutely loved the ski lift and eating snow! The mountain really has something to offer for everyone!