Record low interest rate of 4.86% for SBA 504 Loans in October

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The interest rate for SBA 504 loans has dropped to a point that has never been seen before in the history of the program. The rate for a 20-year loan fell to a record low of 4.86% in October. Small business owners have a real opportunity to obtain long-term, fixed rate financing through the Small Business Administration's (SBA) 504 loan program to purchase commercial real estate at very attractive rates.

SBA 504 loans provide financing for the purchase of commercial real estate and fixed assets and the current interest rate is the lowest since the program's inception in 1986. The SBA's lending partners, Certified Development Companies (CDCs) are busy working with small business borrowers who are taking advantage of this very attractive interest rate to purchase, renovate or build new facilities.

NADCO, the trade association for the nation's CDCs, reports that the interest rate for a 20-year SBA 504 loan has been falling for the past three months and is not at an all-time low of 4.86% for loans funded in October 2009. The bonds that fund SBA 504 loans were sold to investors on October 6 at a rate of 3.92% dropping from 4.2% in September. This low sale price means real opportunity for small businesses to obtain long-term money at extremely low interest rates.

SBA 504 loans are a unique partnership between the private sector and the SBA. For a standard 504 loan, the SBA works through their lending partners – Certified Development Companies - to provide financing for up to 40% of a project with a cap of $1.5 million. A private lender provides a first mortgage for 50% of the project costs and the small business borrower completes the deal by paying 10% down. The current low, fixed interest rate coupled with a low down payment, makes this an exceptional vehicle for obtaining a commercial real estate loan.

SBA 504 loans also foster a number of public policy goals by increasing the amount of financing available for certain types of loans. For example projects that incorporate energy saving technologies for sustainable design, aid rural development or expand minority business development are all eligible for up to $2 million in 504 funding. Certain manufacturing projects and projects that generate renewable energy can obtain up to $4 million in 504 funding.

Over 115,000 savvy, small business borrowers have been taking advantage of these government-guaranteed loans to purchase, build and expand their facilities since 1986. In fact, the SBA 504 loan program has funded over $45 billion in loans to growing small businesses over the past 23 years.

Chris Crawford, NADCO President, noted that "The clock is running out on getting SBA 504 loans with no borrower fees. The economic stimulus funding that is temporarily eliminating the borrower fee for SBA loans will likely run out by November or December. At that point borrowers will have to begin paying borrower fees again to take advantage of SBA loans.”

Crawford recommended, "Any business owner thinking about expanding, should call their banker or a Certified Development Company now and ask about the SBA 504 program. There is just no better deal available for the purchase of real estate or for expansion of existing facilities. 4.86% is an incredible rate for a 20-year commercial loan."

About the National Association of Development Companies (NADCO):

Created in 1981, the National Association of Development Companies is the trade association for America’s Certified Development Companies (CDCs). Certified by the U.S. Small Business Administration, CDCs are community-based economic development organizations that serve their local communities and states, and are dedicated to the promotion of small business expansion and job creation through SBA’s 504 Loan Program. In addition to the 504 program, many CDCs also provide small businesses with access to other Federal, state and local economic development loan programs. These programs provide both long and short term funding for borrowers.

Based in the suburbs of Washington, D.C., NADCO provides legislative and regulatory support for the 504 Loan Program on behalf of CDCs, the program’s lending partners (including first mortgage lenders, attorneys and others allied to the industry), and 504 small business borrowers. For more information, please call (703) 748-2575 or visit http://www.nadco.org

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