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504 Interest Rates Keep Getting Lower

Mar 2012

Interest rates for Small Business Administration (SBA) 504 loans continued an unparalleled drop to new record low levels again this month.

How long these great rates will last is hard to say, but one thing is for sure: there's never has been a better time to participate in the 504 loan program and small business borrowers should take advantage of these unprecedented low rates while they last.

The debenture bonds that funded this month's 20-year 504 loans were sold to investors at an interest rate of 2.51%, falling below last month's previous record of 2.63%. This resulted in a March effective interest rate - with servicing fees added - of 4.59% fixed for 20-year standard loans and 4.79% fixed for 20-year refinance loans.

The 10-year 504 debenture bonds, which are sold bi-monthly, were sold at an interest rate of 1.31%, which eclipsed the previous record of 1.52% in November 2011. This resulted in a March/April effective interest rate - with servicing fees added - of 3.82% fixed for 10-year standard loans and 4.07% fixed for 10-year refinance loans.

With up to 90% financing and amortization terms to 20 years, fixed interest rates this low make the 504 loan program the best deal going for the purchase or refinance of owner-occupied commercial real estate, heavy duty machinery and equipment and other fixed capital assets.

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, 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% equity injection in most cases. No other loan program offers this type of risk security to its 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).

For more information about SBA 504 loans in Florida, contact Florida First Capital by visitingwww.ffcfc.com, emailing atinfo@ffcfc.comor calling 888.320.5504.