On Lending Margin to Subsidiary Companies

At Central Bedfordshire we are in the process of creating two Wholly Owned Subsidiary Companies that will be financed through `On-Lending' from the Council.

The Council will seek to take out specific, fixed rate instruments from PWLB and 'On-Lend' to the Companies with an Interest Premium.  Conscious of possible State Aid implications, we need to gauge what a reasonable margin / premium would be.  Initially we are thinking in the ball park region of 2%.  The loan advances to our Companies would be backed by tangible assets / collateral but I understand the rate charged would have to be acceptable to a Commercial Lender.

Therefore would be most grateful to hear from other LA's who have On-Lending arrangements with their Companies, specifically the Interest Premium/Margin levied.

Thank you