What is the interest rate calculation for the revolving loan of Chesters?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
------| | 2026 | 580,684 | | 2027 | 448,557 | | 2028 | 300,148 | | 2029 | 116,999 $ 1,991,751 | The Agreement includes a revolving loan for maximum borrowings up to $1,000,000 that matures December 31, 2026. Interest is calculated at the greater of 5% or Prime rate plus 1% (8.5% at December 31, 2024 and 2023) and secured by essentially all business assets. There were no amounts outstanding under the revolving loan as of December 31, 2024 and 2023. The revolving loan matures on December 31, 2026.
As part of the Agreement, the Company is required to comply with financial and nonfinancial covenants. Management believes it was in compliance with all covenants as of December 31, 2024. The Company was not in compliance with certain financial covenants for the yea
Source: Item 21 — **FINANCIAL STATEMENTS (FDD page 48)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, the interest rate for the revolving loan is calculated as the greater of 5% or the Prime rate plus 1%. As of December 31, 2024, and 2023, this rate was 8.5%. The revolving loan has a maximum borrowing amount of up to $1,000,000 and matures on December 31, 2026. The loan is secured by essentially all of Chesters' business assets.
It's important to note that while the interest rate is defined, the Prime rate can fluctuate, which would cause the interest rate on the revolving loan to change. A prospective franchisee should monitor the Prime rate to understand potential changes in borrowing costs.
As of the end of 2024 and 2023, there were no outstanding amounts under the revolving loan. Chesters is required to comply with financial and nonfinancial covenants as part of the loan agreement. While Chesters' management believed it was in compliance with all covenants as of December 31, 2024, the company was not in compliance with certain financial covenants for the year ended December 31, 2023, but the bank granted a waiver for this noncompliance during 2024.