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.
December saw record activity for the Small Business Administration (SBA) 504 First Mortgage Loan Pooling Program (FMLP) with a total of 24 loans settled into 10 separate pools, according to industry data. The gross loan amount of all loans settled was almost $60 million, which constitutes roughly one-fifth of the normal 504 debenture volume in a given month.
FMLP volume is growing considerably as lenders realize the 504 secondary market option is a valuable tool for maximizing income while diversifying risk.
The 504 First Mortgage Loan Pooling Program was created to rejuvenate an otherwise stalled secondary market as part of the American Recovery and Reinvestment Act of 2009 and extended until September of 2012 under the Small Business Jobs and Credit Act of 2010. It provides up to $3 billion of SBA guarantees on eligible pools of 504 first mortgages to be sold on the secondary market.
Lenders that participate in the FMLP sell 85% of the value of each eligible first mortgage, retaining 15% of each loan in their portfolio. Eligible loans are pooled and then sold to investors.
Florida First Capital's role in the 504 First Mortgage Loan Pooling Program is to source and package transactions on behalf of the pool originator.
The eligibility of each loan is dependent on the date of the SBA debenture funding. To be eligible, the debenture must have been funded between February of 2009 and September of 2012.
A pool is defined as two or more loans. A pool must be either fixed (for life) or adjustable (any period adjustment including five or 10 years).
The Seller will be paid a premium for the 85% participation interest sold, and will receive at least .50 basis points in servicing income as mandated by the SBA.
There are several key benefits for lenders participating in the 504 First Mortgage Pooling Program, including:
Premium Income - The first mortgage lender will realize premium income on the Gross Loan Interest (85%) of the first mortgage.
Servicing Income - The Seller will earn at least .50% long-term servicing income on the 85% sold portion of each loan, but can be higher once the maximum premium is achieved.
Capital Relief - By selling 85% of each loan, banks will only have to invest a limited amount of capital in each transaction. Banks that were unable to fund high-dollar real estate loans will now be able to get back into the market.
Credit Quality - The Seller's Loan Interest is only 15% of each 504 first mortgage. Any losses are shared pro rata with the Pool Originator and the Investor.
Maintain Customer Relationships - As the servicer, the Seller will retain relationship with the small business owner, ensuring cross-sell opportunities.
Florida First Capital is currently seeking eligible funded loans in order to build efficiently sized loan pools that result in the maximum price paid to the selling lender.
If you have loans where the debentures funded on or after February of 2009, please contact Deborah Petrell, FFCFC Senior Vice President and Sales & Marketing Manager, at 561.756.1745 or by email at deborah@ffcfc.com.
For more information about SBA 504 loans in Florida, contact Florida First Capital by visiting www.ffcfc.com, emailing at info@ffcfc.com or calling 888.320.5504.
