December 2019
Commercial Lending
Rate Drop: December 2019 SBA 504 Loan Interest Rate Report

After 2 months of increased interest rates following a 10-month run of declining rates, the December interest rates for Small Business Administration (SBA) 504 loans dipped back into the mid 3% range.  And the outlook for continued low rates for small business borrowers remains encouraging, according to Frank Keane, the fiscal and selling agent for the program.

SBA 504 Loan Interest Rate ReportThe December 25-year fixed interest rate for standard 504 loans is 3.643%* and 3.645%* for refinance loans.

The 20-year fixed interest rate for standard 504 loans is 3.582%* and 3.584%* for refinance loans.

The 10-year rate for standard 504 loans for November/December (set bimonthly) is 3.852%* and 3.855%* for refinance loans.

Understanding the 504 Loan Interest Rate

Frank Keane, fiscal and selling agent for SBA 504 program funding securities, commented following the Dec. 5 bond sale:

“Last week’s debenture sale for the SBA 504 program was well received and continues to produce ongoing effective rates at attractive levels.  With the Prime Rate having been reduced by 75 bps this year, the differential is not as great as it had been, but the reduced government borrowing fee for FY20 was realized by loans this month for the first time.

“At 2.26% the 20-year debenture rate was 28 bps lower than the 12-month average and total pool size of $342,753,000 for the two debentures was $13,393,000 more than the 12-month average.

The Fed continues to add liquidity to the financial markets to ensure stable financing terms through year-end when cash can be scarce.  The bank continues to buy T-Bills and will do so through next summer as it hopes that activity will reduce the need for continued support in the short-term Repurchase Agreement market.

Both the Federal Reserve Bank and the European Central Bank (recently) announced their satisfaction with economic developments with no plans to tighten monetary policy while leaving the door open to cut rates further.  The three rate cuts so far this year from the Fed have been the most aggressive moves since the financial crisis, leaving the benchmark 10-year Treasury rate lower by 87 bps YTD (unchanged on the week at 1.82%) while the S&P 500 index has gained 25.5%,” Keane said.

The SBA 504 Loan Program provides up to 90% financing at below-market, fixed interest rates (no ARMs) and long amortization terms up to 25 years (no balloons) for the purchase of major fixed assets.

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 to 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.  Loan amounts are SBA 2nd mortgage loan portions only with no limit on overall project dollar size.

*Includes reduced fee structure for FY 2020: For standard 504 loans, the servicing fee (paid annually) was reduced from 0.368% (36.8 basis points) to 0.3205% (32.05 basis points) of the outstanding balance of the loan.  For 504 refinance loans, the servicing fee (paid annually) was reduced from 0.395% (39.5 basis points) to 0.322% (32.2 basis points) of the outstanding balance of the loan.

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