{meta_title}

504 Interest Rate Drops to Near Record Setting Level

Apr 2013

The interest rate for 20-year Small Business Administration (SBA) 504 loans came close to setting another all-time record low this month.

The debenture bonds that funded April's 20-year 504 loans were sold to investors at 2.08%, the second lowest rate in program history and just shy of the record of 1.93% set in December. This resulted in a final effective interest rate - the rate borrowers pay including servicing fees - of just 4.16% fixed.

So far this year, the 20-year effective interest rate has averaged just 4.24%. Last year, the 20-year rate averaged 4.45%.

(Understanding the 504 Loan Interest Rate)

Frank Keane, fiscal agent for Development Company Finance LLC - the entity responsible for marketing and selling 504 funding securities - commented at the beginning of the year that 504 rates were likely to remain low in 2013 based on continuing bond market conditions. He estimated the 20-year effective rate should be around 4.5% on average.

Keane said this month's rate drop follows that trend and is the result of lower Treasury rates fueled by renewed concern for European fiscal responsibility in Cyprus, coupled with the Bank of Japan's Qualitative and Quantitative Easing policy.

“(This) moved Treasury rates lower by 20 bps since our March sale while widening Credit and Interest Rate Swap spreads. Yet demand for the 504 product's Certificates allowed us to price this month at the tightest spread ever to Interest Rate Swaps, +13 bps, improving on the previous best spread from April 2007, 13.6 bps,” he said.

For those small businesses that have been considering purchasing, building and expanding their facilities or upgrading their fixed equipment, now is a great time to act.

504 loans are paired with private-sector commercial loans, providing up to $5 million of small business financing for standard projects and up to $5.5 million for green initiative and small manufacturer projects (SBA loan portions only; there is no limit on overall project dollar size). (Getting Started on a 504 Loan)

The 504 program is an equally great loan product for commercial lenders. Under the program's unique distributed credit structure, our commercial lending partners get a 50% loan-to-value first lien position on the assets being purchased - cutting their risk in half.

Florida First Capital provides SBA-backed financing up to 40% of the project cost and takes a second lien position, and the borrower provides a 10% down payment in most cases. No other loan program offers this type of risk security to a lending partner.

There is just no better deal available today for the purchase of real estate or for expansion of existing facilities. Small business owners who are seeking financing for commercial real estate or fixed equipment purchases are urged to contact a Florida First Capital loan officer today to take advantage of these great interest rates.

For more information about SBA 504 loans in Florida, contact a Florida First Capital Loan Officer here. Florida's original statewide SBA Certified Development Company (CDC). Email: info@ffcfc.com. Phone: 850.681.3601 or toll-free at 888.320.5504.