To properly define a minimum interest rate, you must take into account market conditions, the risks involved, the company's expected ability to fulfill its commitments, your own expectations and finally the probability of the financing request or investment opportunity attracting a lot of interest, increasing competition between investors.
Keep in mind that a lower minimum interest rate doesn't necessarily mean you'll get paid less. A lower minimum interest rate will give you a greater probability of beating other investors to seizing the investment opportunity. The final interest rate, being set by the first investor that gets left out, will be higher than the highest minimum interest rate participating in the investment and, therefore, will almost always be higher (or much higher) than your defined minimum interest rate.
Daskapital advises investors to define their minimum interest rates based on the opportunity's specific risk. To support investors in this exercise, Daskapital defines a Minimum Indicative Interest Rate (Tmin) based on the risk rating/score provided by an independent supplier.
For more information about Tmin click here.
