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 bonds that funded October's 20-year Small Business Administration (SBA) 504 loans saw a 26 basis point increase over last month, which was the lowest of the year. Despite the hike, the resulting effective interest rate (the all-in cost to a borrower) still remains under 5% to the benefit of small business borrowers. Additionally, new lower program fees for 504 loans approved in FY 2018 kicked in.
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 2.85%, resulting in a final effective interest rate of 4.56% for October for standard 504 loans (compared to 4.37% in September, 4.53% in August and 4.76% in July). The 20-year effective interest rate for debt refinance loans is 4.61% for October.
The effective interest rate for 10-year standard 504 loans (which is set bimonthly) is 4.06% for September/October. The 10-year effective interest rate for debt refinance loans is 4.12% for September/October.
For FY 2018, program fees paid on Small Business Administration (SBA) 504 loans have decreased. The changes are applicable only for loans approved on or after Oct. 1, 2017, through Sept. 30, 2018 (not those that are funded after Oct. 1). See Official Monthly 504 Interest Rates
The Upfront SBA Guarantee Fee will continue to be zero for both standard and refinance 504 loans. (Note: this is not the bank fee, which is paid on the first mortgage amount.)
The Ongoing SBA Borrower Fee for 504 standard loans (paid annually) has been reduced from 0.697% (69.7 basis points) to 0.642% (64.2 basis points) of the outstanding balance of the loan.
The Ongoing SBA Borrower Fee for 504 refinance loans (paid annually) has been reduced from 0.731% (73.1 basis points) to 0.682% (68.2 basis points) of the outstanding balance of the loan.
The SBA's 2016 fiscal year runs from Oct. 1, 2017, through Sept. 30, 2018.
Frank Keane, fiscal and selling agent for 504 funding securities, commented following the October bond sale:
“The Week in Review - other than the jobs report (the U.S. shed 33,000 jobs in September, the first negative report in seven years), the item of most interest was SBAP 2017-20J being priced at 2.85%, just 3 bps higher than the December 2015 debenture sale that preceded four rate hikes by the Fed. We've seen the cost of funds increase by 100 bps, but moderate global growth, low inflation and global $ seeking high quality assets have held rates in check.
“That is poised to change with the Fed committed to its dot-plan for more rate increases (the market sets a 92% probability of a December rate hike) and the normalization of its Balance Sheet, but if Chairwoman Yellen is correct, the change should be gradual,” Keane said.
There was confirmation at September's FOMC meeting that the Fed would reduce its monthly Balance Sheet reinvestments by $10 billion starting in October. The monthly caps will increase on a quarterly basis, scheduled to reach $50 billion in October 2018, he said.
The SBA 504 Loan Program provides up to 90% financing at below-market, fixed interest rates and long amortization terms for the purchase of major fixed assets, such as owner-occupied commercial real estate and/or 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, South Alabama or South Georgia,contact aFlorida First Capital Loan Officeror email us atinfo@ffcfc.com. Phone: 850.681.3601 or toll-free at 888.320.5504.
