504 Rates for June and July 2018

Rates in June increased over May by about .10% to 5.32%.  However, rates in July fell to 5.259%, showing the first decline in 3 months.  Also, SBA issued its first 25-year debentures in July with a rate of 5.32%.  Locking in financing for your borrowers at either the 20 or 25-year rates will go a long way to reducing interest rate risk in the coming years.  See below for a three-month 504 interest rate trend line.

 

Give Your Borrowers Options

When presenting your clients with borrowing options, don’t let a lack of familiarity with the 504 Program keep you from including it as a viable financing option. To better understand the 504 Program, there are a variety of resources available to you, including the SBA itself.  The SBA website has a nice overview of the 504 Program which will help to understand what the program can be used for (and what it can’t), structure, eligibility and, of course, program benefits.  Check out the SBA’s 504 Program page here: www.sba.gov/offices/headquarters/ofa/resources/4049

In addition, you may contact your local Certified Development Company for its help and experience.  The loan officers at the CDC will be more than happy to assist you in structuring a deal properly using a 504 Loan.

A third option is the National Association of Development Companies (NADCO), which is the trade group for the 504 Loan Program.  Follow this link for an easy to read primer for the 504 Loan Program: www.nadco.org/page/whatis504?

Giving your borrowers options and letting them choose the best one for their specific circumstances seems a simple concept.  However, often the 504 is left off the table when it comes to owner-occupied real estate and/or capital equipment.  Consider proposing conventional, 504 and even 7a financing, where applicable. Each has its advantages and challenges, but each should be presented to your borrower.  Take advantage of available resources to feel confident that you’ve given your borrower a variety of financing options for their deal.  It is then up to your borrower to determine which of those options suits their specific needs at that time.  It is always going to be more beneficial to our borrowers if they are able to see and understand all available financing options rather than be funneled to a particular structure.

If you have a question about a 504 deal or potential deal, don’t hesitate to call or email.

This entry was posted in Articles.
  • About the Author

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    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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