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SBA 504 Interest Rates Remain in the 2s

Aug 2021

Small Business Administration (SBA) 504 loan fixed interest rates for August saw a slight uptick compared to the last 3 months, but continue to hold in the 2% range. These low-cost loan rates continue to provide an opportune and inexpensive opportunity for small business owners to purchase commercial real estate and start building equity or refinance burdensome high-interest conventional mortgage debt with a cash-out option.

• The August 25-year effective fixed interest rate for standard 504 loans is 2.866% and 2.907% for refinance loans.
• The August 20-year effective fixed interest rate for standard 504 loans is 2.748% and 2.791% for refinance loans.
• The 10-year effective fixed interest rate for standard 504 loans is 2.604% and 2.656% for refinance loans (set bimonthly).

Frank Keane, fiscal agent for SBA 504 program funding securities, commented following the August bond sale:

“As the rates market continued to defy expectations allowing the 504 program to price its August debentures at rates below 1.50% for the third consecutive month, the program is poised to benefit from the Interim Final Rule for SBA Debt Refinancing that became effective July 29.

“(The) ongoing Effective Rates for 2021-20H (2.748%) and 2021-25H (2.866%) (are both) well below Prime, which serves as the base for most adjustable-rate loans. The ability for existing 504 borrowers to refinance without expansion as well as borrowers in other federally guaranteed programs to access 25-year fixed rate money to improve cash flow is a significant step for the 504 program. Coupled with an YTD increase of 37% in approved loans, the program is poised for growth.

“It is noted that recent Effective Rates have inched higher as the benchmark Treasury has declined and that represents investor’s seeking increased credit spread due to the low benchmark rate. Steve Van Order, Selling Agent for the 504 program, reports the Underwriters saw increased customer participation for the debentures which bodes well for expected increased size in future months,” Keane said.

The SBA 504 Loan Program provides up to 90% financing at below-market, fixed interest rates and long amortization terms up to 25 years for the purchase of major fixed assets, such as owner-occupied commercial real estate, renovations, new construction, energy efficient “green” initiatives and/or fixed heavy duty machinery and equipment, as well as the refinance of commercial mortgage and other business debt with or without a cash-out option.

504 loans are paired with private-sector commercial loans and provide up to $5 million of aggregate SBA eligibility on standard 504 projects; up to $5.5 million per 504 energy efficient green project not exceed $16.5 million in the aggregate; and up to $5.5 million per eligible small manufacturing project with no limit on total SBA dollars available. These are SBA 2nd mortgage loan portions only; there is no limit on overall project dollar size.

For more information about SBA 504 loans in Alabama, Florida or Georgia, contact a Florida First Capital Loan Officer or email us at info@ffcfc.com. Phone: 850.681.3601 or toll-free at 888.320.5504.