SBA Loan Rates

SBA loan rates

SBA Loan Rates

SBA Loan Rates 

SBA loan rates for both the SBA 7a and the SBA 504 can be an extremely good value.  As of October 2019, some SBA lenders are offering very aggressive rates for qualified businesses.

For instance, you can get the following terms with a 7a loan for an "owner occupied" building:

100% financing, 10 year fixed rate with 25 year amortization at 4.5%*   

The rate is fixed for 10 years at 4.5%, adjusts after the tenth year, and it is fully amortized over 25 years without a balloon.  Not all borrowers will qualify for this rate offer, but these are outstanding terms if you do qualify.

Please visit our 100% financing page for more info re: 100% financing.

SBA 504 Loan Rates for October 2019 - 3.48%

The 504 program consists of 2 loans:

  1. a first mortgage for approx 50% of the purchase price (or construction or refinance) + plus costs
  2. a second mortgage for 30% to 40% of the total financing (this is the rate mentioned above)

SBA 504 rates for both the first and second mortgage are at all time lows and there are first mortgage lenders offering 25 year fixed rate loans in the 4% - 4.5% range for qualifying borrowers/qualifying properties.

The SBA loan rates for the 504 (second mortgage) program for October 2019 are as follows:

25 year fixed rate: 3.48%.**

20 year fixed rates: 3.40%.

SBA 504 Loan Rates for First Mortgages

SBA 504 first mortgage interest rates were trending up but have since dropped for a few months in a row.  Current rates are the 3.75% to 6.25% range depending on the lender, the quality of the borrower, the property type and how long the loan is fixed. 

Low 25 Year Fixed Rates  

Some SBA lenders offer a low 25 year fixed rate first mortgage option for multi-purpose properties (office, warehouse, light industrial, wholesalers, manufacturing, retail, medical office, dental office, R & D, etc) and is a great choice given that fixed rates are lower than floating rates for these property types at the moment.  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.

Loans For Single Purpose Properties

504 first mortgage rates for properties like hotels, assisted living facilities, self storage facilities, gas station/convenience stores, bowling alleys, family entertainment centers, etc. will vary based on the quality of loan, but long term fixed rates are possible.

SBA Loan Rates - An Explanation

SBA loan rates are set by SBA lenders (not the SBA) and can really vary depending on what the loan is used to finance as well as the quality of the transaction and the type of lender making the loan.

The exception to this rule is the SBA 504 2nd mortgage rate which is typically offered at the same rate throughout the U.S. and determined by a debenture sale once a month

The 504 program is used almost exclusively for commercial real estate and buildings, although it is possible to finance "long life" equipment and, in the case of a refinance, other business debt and some working capital.

The 7a program can be used for "any legitimate business purpose" and is frequently used for real estate as well as the purchase of a business.

Both programs have positives and negatives and as noted above, both are available as long term fixed rates from certain lenders.

SBA 7a Loan Rates

SBA loan rates for the 7a program can be either fixed or variable.

The 25 year fixed rate is for transactions where the majority of the loan proceeds are used for commercial real estate.  The underwriting can be a little tougher for a fixed rate than for a variable rate, but if you qualify you can lock in great rate for the long term.

Variable interest 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 a rate  between Prime + .50%  and Prime + 2.75% with the lower rates going to the more qualified borrowers and the higher rates for the harder transactions.  7a loan rates can also be based on the one month LIBOR rate.

The SBA 7a is a great solution for business acquisitions as well as refinancing of business debt or partner buyouts.

Please contact us at 1-800-414-5285 for more information.

SBA 504 Loan Rates - Additional Info 

504 first mortgages are typically amortized over 25 years but a 30 year amortization is possible with some lenders.  Rates depend on loan size, term, property type and strength of transaction.

The 5 year fixed rate with a 25 year amortization is a popular product. After the initial 5 years the rate could adjust as frequently as monthly or as infrequently as every 5 years depending on the lender.

The combination of the 2 loans and the fact that the second mortgage is always permanently fixed make very attractive rate scenarios possible.

SBA 504 Equipment Loans are typically 10 years and can be anywhere from .25 to 1.5% lower in rate 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 25 Year Fixed Rate for Multi-Purpose Properties

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 yearfirst 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. 

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: $4168.74
  • Second Mortgage: $2990.88
  • Total of Payments: $7159.62

 

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.

* All SBA lenders set their own rates and while they must adhear to SBA rules they have their own guidelines and qualifications.  This particular rate offer is from a lender who lends to stronger borrowers/businesses with good to very good credit, good cash flow, etc.  They require the borrower to come out of pocket costs for appraisal, environmental, title, etc. needed before closing and their mnimum loan amount typically $350,000.

** This is the effective rate.  It includes fees to SBA, CDC and central servicing agent. Some CDC's charge higher loan rates in certain parts of the U.S.  (Rates change monthly).