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504 Interest Rates Continue to Shatter Program Records

Sep 2012

Interest rates for the Small Business Administration's (SBA) 504 Loan Program offered through Florida First Capital continued to go lower this month, breaking all previous records in the loan program's 26 year history.

Not only did the September debenture bond sale represent the lowest interest rates on record for both 20- and 10-year 504 debentures, but also the largest monthly loan pool offering to date. A total of 783 debentures worth $548 million will be funded through the settlement of certificates guaranteed by the SBA.

The debentures that funded this month's 20-year 504 loans were sold to investors at a record low interest rate of 2.20%. This resulted in an effective interest rate -- the rate borrowers pay including servicing fees -- of 4.27% for 20-year standard 504 loans. Through August of this year, the effective interest rate on 20-year loans has averaged only 4.595%.

The 10-year 504 debentures, which are sold bi-monthly, were also sold at a record low interest rate of 0.98%. This resulted in an effective interest rate of 3.48% for 10-year standard 504 loans.

Both the 20- and 10-year effective interest rates are fixed for the term of the 504 loan and require as little as a 10% borrower down payment.

(See Understanding the 504 Interest Rate)

Interest rates this low make the 504 Loan Program the very best deal available for small business owners looking to grow and expand their operations through the purchase of major fixed assets, including the purchase, construction, expansion or renovation of commercial property and/or the acquisition of heavy duty machinery and equipment.

The 504 program is an equally great loan product for commercial lenders. Many financial institutions are under scrutiny from both their boards and investors/shareholders to retain favorable positions and lower lending risks. The 504 is a natural fit in this regard.

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 its 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.

SBA 504 loans provide 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 size).

With up to 90% financing and fixed interest rates this low, now is the best time to participate in the 504 Loan Program. What are you waiting for?

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