504 Rates and News

In the last 3 months, we have seen a gradual decline (October 2017-December 2017).

504 Rates from October 2017 to December 2017 are displayed in the chart below:

Line graph of 504 Rates 3-Month Trend. October, 4.635%, November 4.510% and December, 4.499%.

Many changes to the 504 Program with the recently published SOP 50 10 5 (J). 

Effective January 1, 2018, the new SOP includes several changes to be aware of. I’ve listed below some of the changes to the SOP that could have a significant impact on the use of the Program. I will try and update/expand on these over the next several weeks.

Changes to be aware of:

  • List of “Limited or Special purpose Properties” reduced to 6 categories (from 26):
  • Car Wash Business
  • Gas Stations
  • Hotels, motels and lodging businesses
  • Hospitals, nursing homes and assisted living facilities
  • Marinas
  • Farms, including livestock and dairy facilities

** Note that SBA has indicated that this list is NOT intended to be all-inclusive.

Projects may now involve Historic Rehabilitation Tax Credits

  • Specific guidelines to be followed when using, including lease/sub-lease structure, which lease/sub-lease must be approved by SBA District Counsel prior to closing.
  • These deals may NOT be structured as EPC/OC deals (use of real estate holding company leasing to operating company).


  • Previously, any owner of either the EPC or OC holding 20% or more ownership was required to guarantee.
  • If spouses owned a combined 20% of either the EPC or OC, even if neither owns 20% individually, both spouses must guarantee.
  • Key personnel with no ownership may now be required to guarantee.

Change of Ownership Transactions

  • A borrower may now fund a change of ownership transaction using the 504 Program subject to certain conditions:
  • Buyer is also purchasing company’s real estate or other long-term fixed assets which must be used in company’s operations.
  • Real estate/long-term fixed assets must have been held by the company for a minimum of 36 months prior to the transaction.
  • The purchase price of ownership interest may not exceed the value of eligible assets being acquired (with minor exceptions).
  • The deal must result in purchaser owning 100% of the company.
  • The seller must completely divest himself/herself and may not remain with the company in any capacity.

As you can see, there have been some interesting changes to the Program. Ideally, some of these will give you more opportunities to use a 504 loan or combine a 504 with a 7a to get your borrowers the best financing package available.

Please feel free to reach out with any questions!


This entry was posted in Articles.
  • About the Author


    Thomas M. Woebkenberg

    Tom Woebkenberg practices in the firm’s Real Estate Practice Area. His practice consists primarily of commercial real estate transactions. He represents lenders of all sizes throughout Ohio and Northern Kentucky.

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