It has been a great month for the SBA 504 program as interest rates have dropped to historic lows. In a June 13th Fountainhead Commercial Capital release, its CEO Chris Hurn stated, “For the first time since the inception of the program 35+ years ago, the 20-year fixed rate has dropped below 4%. The June effective rate is 3.98% (and the newer 25-year debenture rate is just slightly higher at just over 4%, 4.09% to be exact).”
This is a big win for the SBA 504 program which is regarded as the less flexible SBA loan option when compared to its more popular counterpart, the SBA 7(a) program. The SBA 7(a) program can be used for uncollateralized business financing needs such as working capital and startup loans, but the SBA 504 program can only be used to finance > 51% owner occupied business real estate or heavy equipment. The SBA 7(a) program is generally priced much higher than the SBA 504 program. Those SBA lenders focused on offering SBA 7(a) financing currently price their loans at 7.25% to 8.25% (1.75% to 2.75% over the Bank Prime Rate). Most SBA 7(a) loans are offered on a quarterly adjustable schedule and are amortized over 25 years, but SBA 504 loans are fixed for up to 25 years. SBA 7(a) loan rates are quite high when compared to the historically low SBA 504 25-year fixed debenture rate that is currently standing at 4.09%.
Fountainhead’s Chris Hurn continued, “I’ll also mention that this rate is 152 basis points under the Bank Prime Rate. That means the June funding rate is the lowest below prime since May, 2007. In real world terms, business owners can borrow money to acquire commercial real estate for their company at the best terms ever, and in turn, can create wealth more effectively than ever. There has never been a better time for entrepreneurs to make use of the SBA 504 program.”
Fountainhead Commercial Capital is a premier SBA lender providing SBA 504, SBA 7(a) and conventional loans from $250,000 to $20+ million. Fountainhead’s team has funded over $23 billion of SBA loans. To learn more about Fountainhead read its LendVer review.