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.
Q: Now that the Small Business Administration (SBA) has reauthorized the 504 Debt Refinancing Program and made it permanent, and assuming a borrower can get approved under the program guidelines, will the closing requirements be different than the regular 504 Loan Program?
A: There were a handful of changes that were been made to the program when the final version was published in May 2016 in regards to pertinent information which impacts the closing of a loan under the permanent 504 Debt Refinancing Program. SBA Policy Notice 5000-1382 summarizes the following:
Fees
For loans approved under the 504 Debt Refinancing Program during FY 2016, the total annual guarantee fee is 0.958% (95.8 basis points) on the unpaid principal balance of the debenture. This fee amount includes the guarantee fee assessed under 13 CFR § 120.97(d)(2) and the supplemental guarantee fee required by the Act to cover the additional cost attributable to the refinancing The Certified Development Company (CDC) should follow the instructions on the authorization for debenture guaranty to ensure the fee is correct. The SBA will review the fee annually to determine whether it needs to be changed and, if so, will issue a notice of any change.
Other Implementation Guidelines
The borrower must meet all current 504 Loan Program occupancy requirements at time of application. (Note: Ordinarily, the 504 Loan Program occupancy requirements must be met prior to debenture closing and funding).
Documentation Requirements
Appraisals are not required at time of application. Appraisals dated within 6 months of the date the application was approved are required prior to closing, and appraisals must otherwise comply with the requirements for appraisals set forth in SOP 50 10 5 (H).
Interim Lender Documentation
The interim lender must execute SBA Form 2288R, Interim Lender Certification for Refinancing Program, similar to what is required in all 504 closings.
Same Institution Debt
When the loan being refinanced is same institution debt (as defined in 13 CFR § 120.882(g)(l5)), the third party lender may modify its existing loan documents (note, deed of trust/mortgage, etc.) instead of requiring the borrower to execute and record new loan documents for the third party loan. All modified loan documents must meet the SBA's regulatory requirements for a third party loan (see 13 CFR §§ 120.920 and 120.921).
In addition, when the loan being refinanced is same institution debt, no interim lender may be used; instead, an escrow account is required, and:
(1) The third party lender (who, in this case, is also the lender of the debt being refinanced) must execute SBA Form 2416, Lender Certification for Refinanced Loan.
(2) The CDC must create an escrow account at the time of closing of the 504 loan for the purpose of holding the borrower's cash contribution, if any, and the net debenture proceeds. The following requirements apply to the escrow account ("the account"):
a) The account will be established in accordance with an escrow agreement which must be executed by the borrower, the third party lender, the escrow agent and the CDC. The account may be held by the CDC attorney, title company or other party approved by SBA district counsel.
b) The borrower's cash contribution, if any, must be deposited into the account at the time of closing of the 504 loan.
c) A copy of the escrow agreement must be provided to the SBA's district counsel with evidence of funding by the borrower's cash contribution, if any, at the time of closing of the 504 loan.
d) The net debenture proceeds must be wired to the account, and all funds may be released only upon written approval by the CDC and SBA, provided that CDC/SBA have the required lien positions on the collateral as set forth in the authorization and debenture guaranty.
e) The debt to be refinanced will be satisfied by payment of the escrowed funds to the third party lender.
Other Than Same Institution Debt
When the loan being refinanced is not same institution debt, the SBA may permit the lender of the debt to be refinanced to assign its existing loan documents to the interim lender if an interim lender is used, or to the third party lender if no interim lender is used. The existing loan documents may be modified, as appropriate, rather than requiring that new documents be executed for the refinancing project. The interim lender, if any, may then assign the documents to the third party lender.
Note: Effective Date for Accepting Applications
CDCs began accepting applications effective June 24, 2016. For additional information regarding the application process, please contact Florida First Capital.
If you have a question you'd like our SBA 504 loan experts to answer, email us atinfo@ffcfc.comor call 850.681.3601 or toll-free at 888.320.5504.
