SBA 504 Small Business Loan Interest Rate Drops to 5.14% - Now is the Time to Buy

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The Small Business Administration's (SBA) 504 loan program is providing long-term, fixed rate financing for commercial real estate at the lowest interest rate since the program's inception. The SBA's lending partners, Certified Development Companies (CDCs) are busy working with small business borrowers who are taking advantage of this record low interest rate to purchase or build new facilities.

Six-Month Recovery Act Report Card

NADCO, the trade association for the nation's Certified Development Companies (CDCs), reports that the interest rate for a 20-year SBA 504 loan hit a record low of 5.14% in September 2009. The September bonds that fund SBA loans were sold to investors this month at a rate of 4.2%. This low sale price, coupled with the fee elimination provided by the Congressional economic stimulus bill, resulted in an effective interest rate – including fees – of only 5.14% for borrowers in September. This interest rate is the lowest since the program began in 1986.

The Small Business Administration's (SBA) 504 loan program provides long-term, fixed rate financing for commercial real estate, and has funded nearly $40 billion in loans to growing small businesses over the past 23 years. The SBA's lending partners, Certified Development Companies (CDCs) are extremely busy working with small business borrowers who are taking advantage of these record low interest rates to purchase, build or expand their own facilities.

Chris Crawford, NADCO President, observed that "5.14% is an incredible rate for a 20-year, fixed rate commercial loan. Additionally, 504 loans normally require a low down payment of as little as 10%. When you consider the drop in the price of commercial real estate and the inventory currently on the market, small businesses have a real opportunity to expand or buy their first building right now.”

SBA recently released their “Six-Month Recovery Act Report Card” that indicated there has been a significant recovery in loan volume since the American Recovery and Reinvestment Act (ARRA) provisions were implemented on March 16, 2009. “Average weekly loan dollar volumes have risen 52% in the 7(a) and 504 programs, compared to the weeks preceding ARRA’s passage. In July 2009, SBA loan volume was back to only 6% lower than SBA’s FY 2008 monthly average.”

This is both good news and bad news. With the increase in loan volume, the stimulus funding that provided $375 million to temporarily eliminate borrower fees in both the SBA 504 and 7(a) loan programs will likely be exhausted by the end of this year leaving everyone wondering if there will be any further relief.

Crawford went on to say, "There is just no better deal available for the purchase of real estate or for expansion of existing facilities. I urge any business owner thinking about expanding to call their banker and ask about the SBA 504 program now. Our CDC members are working hard with our bank partners, and we have money available for sound, small business expansion projects," Crawford said

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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