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SBA 504 Loan Program Lending Report: November 2013

Nov 2013

The effective interest rate for 20-year Small Business Administration (SBA) 504 loans that funded this month held steady while the 10-year interest rate dropped slightly.

The debenture bonds that funded November's 20-year 504 loans were sold to investors at 3.38%, resulting in a final effective interest rate of 5.45% (no change from last month's rate). For 2013 to date, the effective interest rate for 20-year loans has averaged 4.79%.

For 10-year 504 loans (which are set bimonthly), the debenture bonds were sold to investors at 1.88%, resulting in a final effective interest rate of 4.40% for November/December (down from 4.85% in September/October). For 2013 to date, the effective interest rate for 10-year loans has averaged 4.21%.

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 November debenture sale:

“Non-farm payrolls are the market moving factor as clarity is sought regarding Federal Reserve Bank monetary policy and continuation of QE3. September's weak report helped to lower rates while the delayed October report pushed rates higher by .16 bps…and reinforced a prevailing negative sentiment with investors.

“The market has been unable to sustain its gains so we are back to waiting for economic data and forward guidance from the FOMC (Federal Open Market Committee), which we will receive mid-December after their next meeting. Combined with traditional end-of-year hesitancy, we can expect low trading volume and reduced volatility to be the norm unless headline risk presents itself,” 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% fixed 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 (SBA loan portions only; there is no limit on overall project dollar size).

Get Started on a 504 Loan

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.