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 effective interest rate for 20-year Small Business Administration (SBA) 504 loans that funded in July fell below the 5% mark for the first time in 12 months while the 10-year rate remained unchanged.
The debenture bonds that funded this month's 20-year 504 loans were sold to investors at 2.87%, resulting in a final effective interest rate of 4.952% (compared to 5.069% in June and 5.080% in May). Year to date, the 20-year rate has averaged 5.204%.
For 10-year 504 loans (which are set bimonthly), the debenture bonds were sold at 1.98%, resulting in a final effective interest rate of 4.510% for July/August (compared to 4.508% for May/June and 4.484% for March/April). Year to date, the 10-year rate has averaged 4.543%.
Both the 20- and 10-year SBA 504 interest rates are fixed for the term of the loan and require as little as a 10% borrower down payment.
504 loans are funded by the sale of debentures (or bonds) which are pooled and sold on Wall Street each month. The effective interest rate - the rate borrowers pay - is comprised of the debenture rate (which is pegged to an increment above the current market rate for U.S. Treasury issues), the note rate and ongoing carrying costs of the program as set by the SBA.
Frank Keane, fiscal agent for Development Company Finance LLC - the entity responsible for marketing and selling 504 funding securities - commented following the July debenture sale:
“Lower rate, tighter spread continues to be the theme for our 20-year series. Conflicted is the only way to describe investor sentiment about the market - 1QGDP was revised down to -2.9% but job gains are strong and the Unemployment Rate is at 6.1%, its lowest level in five years. Weak wage growth, even with low inflation, is resulting in static consumer demand, a key driver of the economy.
“Contributing factors for this rate environment continue to be global unrest, strong demand for US$ denominated assets, and weak, deflationary economies in Europe. Regarding a widely expected higher rate environment even Federal Reserve Chairwoman Janet Yellen cautioned that ‘considerable uncertainty' about the economic outlook could lead to interest rates rising earlier or later than currently expected. Such ambiguity has become the norm as the health of our recovery remains suspect,” Keane commented.
For small business owners looking to expand and modernize their operations through the purchase of major fixed assets, the SBA 504 Loan Program offered through Florida First Capital 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, providing up to $5 million of small business financing for standard projects and up to $5.5 million for green initiative and small manufacturer projects (these are SBA 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 Officer hereor email us atinfo@ffcfc.com. Phone: 850.681.3601 or toll-free at 888.320.5504.
