SBA 504 Rates for October 2016
The 504 loan rate (effective rate) for 20 year commercial real estate loans is 3.98%* The "effective rate" is inclusive of all servicing fees. (Some lenders do not advertise the "all inclusive" rate, so you may see the rate advertised slightly lower in some areas of the country).
The 504 program consists of 2 loans:
- first mortgage for approx 50% of the project cost
- 504 second mortgage guaranteed by the SBA (this is the rate referenced above).
Low 25 Year Fixed Rates for Multi-Purpose Properties
First mortgage rates and terms will vary depending on the type and size of the loan. The 25 year fixed rate option is an incredibly good deal, but is typically only available for multi-purpose properties (office, warehouse, light industrial, wholesalers, manufacturing, retail, medical office, dental office, R & D, etc). To be eligible for this particular program the property needs to be of the type that could be used by many different types of businesses. The rates for this program have been in the 4.5% range throughout 2016. (Other options are available for single purpose properties - see below).
SBA 7a Loan Rates
SBA 7a rates can be either fixed or variable.
The 25 year fixed rate is very competitive and never adjusts. These loans are available if the majority of the loan proceeds are used for commercial real estate. The underwriting can be a little tougher than for a variable rate, but this is a phenomenal opportunity to lock in great low rates for the long term if you qualify.
Variable rates are typically Prime + a margin "not to exceed 2.75%,"
The margin is set by the lender based on their cost of funds and the quality of the loan. Most lenders will offer something between Prime + 1.25% and Prime + 2.75%. 7a loans can also be based on the one month LIBOR rate.
Please contact us at 1-800-414-5285 for more information about the possibility of a fixed rate
10 Year Loans for Business Acquisitions
The SBA 7a is also a great solution for business acquisitions as well as refinancing of business debt or partner buyouts and the rates can be fixed or variable for up to 10 years.
504 Loan Rates
First Mortgage Rates: Currently range from high 3% range to as much as 6.5% depending on loan size, term, property type and strength of transaction and are typically amortized for 20 to 25 years and in some cases as long as 30 years.
The 5 year fixed rate with a 25 year amortization is also a popular product. After the initial 5 years the loan could adjust as frequently as monthly or as infrequently as every 5 years depending on the lender.
September 2016 504 Mortgage Rate: 3.98%* - fixed for 20 years.
The combination of the 2 loans and the fact that the second mortgage is always permanently fixed make for very attractive 504 loan terms.
SBA 504 Equipment Loans are typically 10 years and can be anywhere from .25 to 1.5% lower than commercial real estate transactions.
SBA 504 Refinance Rates may be slightly higher and "multi-purpose" property rates are typically lower than single or special use properties like hotels or self storage properties.
More About The Fixed Rate Option for 504 First Mortgage
The low rate SBA 25 year fixed rate first mortgage option is available for strong borrowers (strong cash flow, very good credit and credit scores, etc.) financing multi-use properties under the 504 program. The loan is fixed for the entire term of the 25 year first mortgage.
The rates for this program are very competitive and when combined with the low rate second mortgage it makes for very attractive fully fixed long term rates. (The rate for the first mortgage will vary depending on loan size, prepayment penalty, etc).
Again, this program is a true fixed rate that will never adjust, so while the rate may be higher than the 1. 3 or 5 year fixed and other options, this loan is the better choice if you intend to own your property for the long haul.
Please contact us for more information about this program: 1-800-414-5285
504 Loan Payment Example
Here is an example of loan amounts and payments for a $1.5 million transaction with 10% down and a 1st mortgage rate of 4.5%:
Project Cost: $1,500,000
Down Payment/Equity Injection: $150,000
First Mortgage: $750,000
Second Mortgage: $600,000
The payments would be as follows:
First Mortgage: $4168.75
Second Mortgage: $3629.56
Total of Payments: $7798.31
The 504 offers a low monthly payment with the least cash out of pocket and it compares very favorably with most any other commercial loan program. It is available for purchase, refinance, construction or renovation of owner occupied (owner-user) commercial property.
More SBA 504 Loan info: 504 Loans
Please contact us at 1-800-414-5285 to find out how the SBA 504 or 7a could help your business.
Please note: the SBA does not make loans directly and interest rates are set by the lenders who make the loans.
* Rate includes fees to SBA, CDC and central servicing
agent. (Rates change monthly).