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SBA 504 Interest Rates Update: February 2022

Feb 2022

Interest rates for Small Business Administration (SBA) 504 loans are on the rise, but there are still plenty of great fixed rates ahead for small business owners looking to buy or refinance commercial real estate.

• The February 25-year effective fixed interest rate for standard 504 loans is 3.598% and 3.612% for refinance loans.
• The February 20-year effective fixed interest rate for standard 504 loans is 3.454% and 3.469% for refinance loans.
• The 10-year effective fixed interest rate for standard 504 loans is 3.070% and 3.096% for refinance loans (set bimonthly).

Frank Keane, fiscal and selling agent for SBA 504 program funding securities, commented following the February 10 bond sale:

“The February 2022 SBA 504 debenture offering was conducted during tough capital market conditions that featured a notable rise in Treasury yields. … In terms of the m/m change in the coupon for investors and, therefore, the interest rate for the borrowers, the 38 bps monthly increase was one of the largest in some time.

“Understanding the Backdrop Is Key. The Fed is preparing to exit from a couple of years of massive quantitative easing and near-zero policy rates, at a time of the highest inflation rates since the beginning of the ‘80s. We've never experienced this combination of events before in the markets.

“There was a predictably strong reaction in the fixed income market, and key interest rates quickly increased. For example, the Freddie Mac 30-year mortgage rate is now near 4% (3.92% for the February 17 survey that does not include an assumed 0.8 pt. in upfront fees). That rate is up 81 bps since the end of 2021. By comparison, the 504 25-year debenture rate increased by 57 bps since the December offering.

“Thus far, however, it has been a very orderly market move there has been no experience of a destructive taper tantrum as we saw the first time the Fed tried to exit from quantitative easing on the other side of the global financial crisis,” 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.