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 Small Business Administration (SBA) has released guidance on implementing extended payment subsidies of principal, interest and fees for 504 loans under Section 1112 of the CARES Act as amended by Section 325 of the Economic Aid Act enacted in December.
Section 325 expanded eligibility of covered loans for First Round Section 1112 Payments (as originally authorized under the CARES Act) AND authorized a Second Round of Section 1112 payments.
Following is a summary of the key provisions of the SBA notice. We strongly recommend reading SBA Procedural Notice 5000-20079 for complete details.
Availability of Funds for All Section 1112 Payments
Congress appropriated $3.5 billion for carrying out section 325 of the Economic Aid Act, and those funds remain available until expended. The number of months of payment assistance detailed in the Notice is subject to adjustment based on availability of funds.
First Round Section 1112 Payments
Covered loans that were approved on or before Sept. 27, 2020, are now eligible for First Round Section 1112 Payments even if the loan was not fully disbursed on or before Sept. 27, 2020. Previously, the SBA required that a covered loan be closed and fully disbursed in a regular servicing status to qualify for payment subsidies.
The program’s Central Servicing Agent (CSA) will review the 504 portfolio and identify the 504 loans that were approved on or before Sept. 27, 2020, and fully funded on or after Sept. 28, 2020 (“Newly Eligible First Round Loans”). If the loan was funded on or after Sept. 28, 2020, and the loan is in a regular servicing status, the loan is eligible to receive Section 1112 payments for a 6-month period beginning with the next payment due or, if the loan is on deferment, beginning with the first month after the deferment period.
The SBA will make the payments by the 15th day of the month. The CSA will process Section 1112 payments for these Newly Eligible First Round Loans. All First Round Section 1112 Payments must be completed before a loan may receive any Second Round Section 1112 Payments.
Second Round Section 1112 Payments – Not to Exceed $9,000 per Month
The borrower is responsible for any amount exceeding $9,000 (“excess due”) and must either pay the amount over $9,000 at the time the payment is due or enter into an agreement with the Lender in accordance with SBA’s Loan Program Requirements and prudent lending standards to pay that amount under mutually agreeable terms (i.e. deferment and catch-up plans).
The SBA will make Second Round Section 1112 Payments by the 15th day of the month. Note: The CSA will not debit borrower accounts in February, March, and April. If a borrower is not eligible to receive Section 1112 payments per Procedural Notice 5000-20079, they will need to submit their payment to the CSA via wire or check.
Scheduling of Second Round Section 1112 Payments
504 loans approved before March 27, 2020, and not on deferment – The SBA will make Second Round Section 1112 Payments on 504 loans as follows:
504 loans approved before March 27, 2020, and on deferment – The SBA will make the Second Round Section 1112 Payments as follows:
504 loans approved during the period beginning on Feb. 1, 2021, and ending on Sept. 30, 2021 – The SBA will make Section 1112 Payments for the 6-month period beginning with the first payment due on the loan after the loan has been moved into a regular servicing status (closed and funded).
504 loans approved during the period beginning on March 27, 2020, and ending on Sept. 27, 2020 – The SBA may make Second Round Section 1112 Payments if the SBA determines that there are sufficient funds.
504 loans approved during the period beginning on Sept. 28, 2020, and ending on Jan. 31, 2021, are not eligible to receive Second Round Section 1112 Payments
A borrower eligible for Section 1112 payments on a loan approved beginning on March 27, 2020, and ending on Sept. 27, 2020, may not receive assistance under Section 1112 for any other loan approved beginning on or after Feb. 1, 2021.
The SBA will be mailing a letter to every borrower with a loan approved prior to Sept. 27, 2020. The letter will outline eligibility for any Section 1112 payment assistance resulting from the Economic Aid Act.
See SBA Procedural Notice 5000-20079 for complete details.
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, renovations, new construction, energy efficient “green” initiatives and/or fixed heavy duty machinery and equipment, as well as the refinance of commercial mortgage and other business debt with or without a cash-out option.
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 a Florida First Capital Loan Officer or email us at info@ffcfc.com. Phone: 850.681.3601 or toll-free at 888.320.5504.
