Credit margin
What is the credit margin on a business loan, and what is it priced on?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
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The credit margin is the part of a floating loan's interest rate that the bank sets for the borrower, added to a base rate that moves with the market. The base rate is the price of money; the margin is the price of this borrower — its risk grade, its security, the capital the loan uses, and the bank's appetite for its sector. A swap or a fixed rate changes only the base-rate part, which is why a borrower that has fixed its rate still has a margin that can move at a review, if the facility allows it.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
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