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Sterling offers rate risk management products, or derivatives, to its customers. These products provide Sterling the means to offer customized loan structures that meet customer interest rate risk-management needs and risks. Sterling provides the following products:
An interest rate swap is an exchange of interest rate exposures between two parties from floating to fixed or vice versa, that provide them indirect access to either fixed or floating capital markets. Swaps effectively convert either a variable rate payment into a fixed rate payment, or, conversely, a fixed rate payment into a variable rate payment.
An interest rate cap allows a customer to establish a maximum rate on their variable rate loan. The customer pays an up-front fee for the cap. If the variable rate on the loan exceeds the cap rate, the customer is reimbursed for the additional interest expense above the cap rate.
An interest rate collar is a combination of an interest rate cap sold to Sterling’s customer and an interest rate floor sold to Sterling by the customer. The collar establishes a maximum rate (under the cap) and a minimum rate (over the floor) between which the interest rate on the loan will fluctuate. The collar structure typically benefits a customer by reducing the up-front fee paid with a similarly structured stand-alone interest rate cap (by the value of the interest rate floor sold to Sterling).
Please do not hesitate to contact the Investment Department toll-free at (866) 262-6494 with any questions or for indicative pricing and structures.
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