April 2019
Commercial Lending
SBA 504 Loan Interest Rate Report: April 2019

Continued great news for small business borrowers!  The bonds that funded April’s Small Business Administration (SBA) 504 loans remained on a downward trend, resulting in full-term fixed effective interest rates that continue to be significantly below the Prime Rate.

SBA 504 Loan Interest Rate ReportThe bonds that funded the 25-year 504 loans were sold to investors at 3.21% (the lowest since the 25-year option debuted in July 2019), resulting in a final effective interest rate of 4.53% for April for standard 504 loans (compared to 4.74% for March and 4.77% for February).  The 25-year effective interest rate for debt refinance loans is 4.56% for April.

The bonds that funded the 20-year 504 loans were sold to investors at 2.98% (the lowest since January 2018), resulting in a final effective interest rate of 4.36% for April for standard 504 loans (compared to 4.58% for March and 4.64% in February). The 20-year effective interest rate for debt refinance loans is 4.40% for April.

The bonds that funded the 10-year 504 loans were sold to investors at 2.92% (the lowest since January 2018), resulting in a final effective interest rate of 4.62% for 10-year standard 504 loans for March/April (set bimonthly; compared to 4.65% for January/February and 5.18% for November/December).  The 10-year effective interest rate for debt refinance loans is 4.66% for March/April.

Understanding the 504 Loan Interest Rate

Frank Keane, fiscal and selling agent for SBA 504 program funding securities, commented following the April bond sale:

“In a week that saw continued strength in equities and a late spike in Treasury rates, it is important to note how the 504 loan program is delivering fixed rate funding for small business borrowers at rates significantly below the Prime Rate.

“On Thursday (April 11), the 504 program priced its 20- and 25-year debentures at rates that continue to decline and more importantly, at ongoing effective rates that are dramatically lower than banks’ base lending rate (of 5.5%).  (The 20-year effective rate at 4.36% is -1.14% less than Prime; and the 25-year effective rate at 4.53% is -.97% less.)

“Of particular interest is that 46% of the $360,347,000 total that was funded (this month) was in the program’s relatively new 25-year maturity. The growth in demand for this maturity has steadily risen since its introduction in July 2018, and now totals 940 loans for $786,957,000,” Keane said.

The SBA 504 Loan Program provides up to 90% financing at below-Prime, fixed interest rates and long amortization terms up to 25 years for the purchase of major fixed assets, such as owner-occupied commercial real estate, energy efficient “green” initiatives and/or fixed heavy duty machinery and equipment.

504 loans are paired with private-sector commercial loans and provide up to $5 million of aggregate SBA eligibility on standard 504 projects; up to $5.5 million per 504 energy efficient green project not exceed $16.5 million in the aggregate; and up to $5.5 million per eligible small manufacturing project with no limit on total SBA dollars available.  These are SBA 2nd mortgage loan portions only; there is no limit on overall project dollar size.

For more information about SBA 504 loans in Alabama, Florida or South Georgia, contact a Florida First Capital Loan Officer or email us at info@FloridaFirst.com.  Phone: 850.681.3601 or toll-free at 800.504.LOAN.