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SBA 504 Interest Rates Update: October 2021

Oct 2021

Small Business Administration (SBA) 504 loan fixed interest rates are on the rise. Fortunately, program fees paid on 504 loans have decrease significantly for FY 2022, helping to offset that upswing. The reduction in fees is a direct result of the better than expected performance of the 504 loan portfolio.

Note: These changes are applicable only for loans approved on or after Oct. 1, 2021, through Sept. 30, 2022.

• The October 25-year effective fixed interest rate for standard 504 loans is 2.912% and 2.926% for refinance loans.
• The October 20-year effective fixed interest rate for standard 504 loans is 2.765% and 2.779% for refinance loans.
• The 10-year effective fixed interest rate for standard 504 loans is 2.677% and 2.739% for refinance loans (set bimonthly).

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

Growth

“That header may seem odd for a debenture sale that was smaller than the month before, but the September sale was the second largest in program history and October’s numbers were $73 million above the previous 12-month average.

“(Following) the sharp decline in funding that followed the record sale in September 2020 … the 504 program recovered throughout FY 2021 to record the second highest amount of debentures sold, $4,875,216,000. Coupled with approved loans that are 41% greater than a year ago, the program can expect to see more borrowers seeking fixed-rate loans in a recovering economy.

“Regarding our October sale, the benchmark Treasury market had moved higher (1.557%) from its low early pandemic levels of 0.752% when 2020-25H was priced at 1.01%. Fourteen months later, the same maturity was priced at 1.74% but still offers an effective rate to small business borrowers below Prime, which serves as a base for alternative funding opportunities that are adjustable rate based,” 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.