SBA 504 Loan Interest Rates
Official monthly SBA 504 effective interest rate tables can be found at Eagle Compliance LLC. 25- and 20-year term loans fund every month; 10-year term loans fund every other month. Effective interest rates are inclusive of servicing fees, which are subject to credit risk of the applicant.
Q - What is the purpose of the Internal Revenue Service (IRS) tax transcript/verification of financial information? Can a Small Business Administration (SBA) 504 loan be closed if the IRS tax transcripts have not been received and verified?
A - The SBA's tax verification process is in place to determine if:
a) The small business applicant filed business tax returns; and
b) The small business applicant's financial statements provided as part of the application agree with the business tax returns submitted to the IRS.
For a sole proprietorship, the certified development company (CDC) must verify the Schedule C.
For a change of ownership, the CDC must verify the seller's business tax returns or a sole proprietor's Schedule C. Where there is an acquisition of a division or a segment of an existing business, other forms of verification may be used in lieu of the 4506-T (e.g., sales tax payment records).
Prior to first disbursement of loan proceeds, the CDC must obtain verification of financial information using specific guidelines for the tax transcript/verification process as follows:
(1) Within 10 days of receipt of the 504 authorization, the CDC must submit IRS Form 4506 - T with SBA logo to the IRS to obtain federal income tax information on the borrower, or the operating company if the Borrower is an EPC, for the last two years unless the 7(a) size standard is used which requires three years.
(2) If the business has been operating between zero and two years, the CDC must obtain the information for all years in operation.
(3) This requirement does not include tax information for the most recent fiscal year if the fiscal year-end is within six months of the date the SBA received the application. If the applicant has filed an extension for the most recent fiscal year, the CDC must obtain a copy of the extension along with evidence of payment of estimated taxes.
(4) The CDC must compare the tax data received from the IRS with the financial data or tax returns submitted with the loan application.
(5) The borrower must resolve any significant differences to the satisfaction of the CDC and the SBA's Sacramento Loan Processing Center (SLPC). Failure to resolve differences may result in cancellation of the loan.
(6) For a change of ownership, the CDC must verify financial information provided by the seller of the business in the same manner as above.
(7) If the CDC does not receive a response from the IRS or copy of the tax transcript within 10 business days, the CDC:
(a) May proceed to close and disburse the loan;
(b) Must follow-up with the IRS to obtain and verify the tax data by resubmitting a copy of the Form 4506-T to the IRS with the notation “Second Request” in the top right hand side;
(c) Must document its file with a dated copy of the second submission; and
(d) Must perform the verification and resolve any significant differences discovered.
Further remedies are provided for transcripts returned with “Record Not Found”, and in those extreme instances where a small business applicant has not filed the required federal tax returns the applicant is not eligible for SBA financial assistance.
If you have a question you'd like our SBA 504 loan experts to answer, email us at info@ffcfc.com or call 888.320.5504.
