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.
The interest rate for 20-year Small Business Administration (SBA) 504 loans that funded in January remained steady in the 4.8% range despite a Federal Reserve rate hike last month. Frank Keane, fiscal and selling agent for Eagle Compliance, LLC - the entity responsible for marketing, pricing and selling 504 funding securities - comments about market conditions, additional Federal Reserve rate hikes and the effect on future 504 interest rates.
504 loans are funded by the sale of bonds (aka debentures) which are pooled and sold on Wall Street each month (see Understanding the 504 Loan Interest Rate).
The bonds that funded this month's 20-year 504 loans were sold to investors at 2.78%, marking the 20th month in a row the bond rate has remained below 3%. This resulted in a final effective interest rate (the all-in cost to a borrower) of 4.83% for January (slightly down from 4.87% in December). For CY 2015, the 20-year rate averaged 4.80%.
For 10-year 504 loans (which are set bimonthly), the bonds were sold at 1.80% resulting in a final effective interest rate of 4.28% for January/February. For CY 2015, the 10-year rate averaged 4.31%.
Frank Keane, fiscal and selling agent for 504 funding securities, commented following the January bond sale:
“The driving force in (recent) market activity focused on China, with stock trading halted two separate days by triggers that were activated by intraday declines of 7%. By the end of the week, regulators abandoned the triggers, but you could see the impact its equity weakness had on global equity exchanges and commodities. Gold resumed its identity as a 'safe-haven' investment (until Friday) (Jan. 15), oil prices declined to 2003 lows and Treasuries saw increased demand as investors continued to seek safety.
“On Dec. 16, after the Federal Reserve raised its benchmark rate 25 bps the 10-year Treasury yield closed the day at 2.29% and expectations were for it to inch higher as the market was preparing for as many as four more increases in 2016. Friday's (Jan. 15) close at 2.12% reinforces the global demand for 'safe-haven' assets and continues to assist the 504 program in delivering (low) effective rates to borrowers, like the 4.83% rate on last Thursday's (Jan. 7) 20-year debenture.
“Minutes of the Fed's December meeting were released last Wednesday (Jan. 6) and revealed Committee members' concerns about lingering low inflation, a strong dollar, and their effect on trade. That said, some officials continued to talk about four possible rate hikes this year, something the markets are less inclined to believe,” commented Keane.
The SBA 504 Loan Program provides up to 90% below-market, fixed interest rate financing with repayment terms up to 20 years for the purchase of commercial property and/or fixed heavy duty machinery and equipment.
504 loans are paired with private-sector commercial loans and provide up to $5 million for standard and public policy projects (aggregate limit) and up to $5.5 million per green initiative and small manufacturer projects. 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 Florida,contact a Florida First Capital Loan Officeror email us atinfo@ffcfc.com. Phone: 850.681.3601 or toll-free at 888.320.5504.
