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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.
Oct 2018
The bonds that funded October's 20- and 25-year Small Business Administration (SBA) 504 loans increased over last month, but the resulting effective interest rate (the all-in cost to a borrower) declined thanks to reduced loan servicing fees for FY 19 that went into effect Oct.1.
For standard 504 loans, the servicing fee (paid annually) was reduced from 0.642% (or 64.2 basis points) to 0.368% (or 36.8 basis points) of the outstanding balance of the loan. For refinance 504 loans, the servicing fee (paid annually) was reduced from 0.682% (or 68.2 basis points) to 0.395% (39.5 basis points) of the outstanding balance of the loan.
The bonds that funded the 25-year 504 loans were sold to investors at 3.89%, resulting in a final effective interest rate of 5.21% under the new fee schedule for October for standard 504 loans (compared to 5.29% in September and 5.35% in August). The 25-year effective interest rate for debt refinance loans is 5.24% for October.
The bonds that funded the 20-year 504 loans were sold to investors at 3.77%, resulting in a final effective interest rate of 5.15% under the new fee schedule for October for standard 504 loans (compared to 5.25% for September and 5.30% for August). The 20-year effective interest rate for debt refinance loans is 5.19% for October.
The bonds that funded the 10-year 504 loans were sold to investors at 3.14%, resulting in a final effective interest rate of 4.84% under the new fee schedule for 10-year standard 504 loans for September/October (set bimonthly; compared to 5.30% for July/August and 5.29% for May/June). The 10-year effective interest rate for debt refinance loans is 4.88% for September/October.
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
Frank Keane, fiscal and selling agent for SBA 504 program funding securities, commented following the October 11 bond sale:
“The previous week's increase in rates reversed itself, only after sending US stock markets down 4.1% for the week, and that is after a Friday rally of 1.4%.
“Adding to (ongoing) rate concerns, the Fed is shrinking its balance sheet and the ECB is expected to end its QE program at year-end.
“The safe-haven rally in Treasuries was relatively modest as stock prices tumbled. Ordinarily, such a rout in equities would produce a more significant move to lower yields, but that trade is being tempered by expectation of higher rates and trade tensions.
“That 7 bps weekly decline in the 10 year UST rate did assist the SBA 504 program to price its October debentures at 3.77% and 3.89%, for its 20 and 25 year issues respectively.
“In addition to the successful (debenture) sales, last week's supply of debt saw good demand with as much as 65% of Treasury's 10 and 30 year issues going to indirect/foreign bidders,” 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, energy efficient “green” initiatives and/or heavy duty machinery and equipment.
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 South Georgia,contact aFlorida First Capital Loan Officeror email us atinfo@ffcfc.com. Phone: 850.681.3601 or toll-free at 800.504.LOAN.