504 Rates Continue to Drop

The most recent quarter has seen SBA 504 rates continue to decline from April’s high of 4.367% to the most recent rate in June of 3.983% for the 20-year loans.   

Rates for the 25-year loans have followed suit with the April rate coming in at 4.532%, continuing to drop through May with the June rate settling in at 4.090%. 

UPDATE ON POTENTIAL CHANGES TO THE 504 PROGRAM AND A TITLE INSURANCE CHARGE TO BE AWARE OF:

The Senate Small Business Committee is considering some changes to improve the scope of the 504 Loan Program as well as its delivery.  Among the changes being considered:

  1. Creation of a 504 Express Loan for loans under $500,000.00
  2. Increasing the maximum 504 loan amount to small manufacturers from $5.5MM to $10MM
  3. Streamlining the pre-closing process to improve timing for approvals and closings

The legislative process which includes these potential changes is just now beginning.  More importantly, the fact that the Senate Committee is aware of these challenges to the 504 Program and is looking to make necessary changes should be encouraging to both small businesses and lenders.   

MANDATORY CHARGE FOR REMOVAL OF MECHANICS LIEN EXCEPTION FROM LOAN POLICIES:

Effective July 1, 2019, the Ohio Department of Insurance has approved a charge for the removal of the mechanic’s lien exception from loan policies.  In the past, a standard title affidavit and perhaps a “No Work Letter” would be sufficient to delete the mechanic’s lien exception from the lender’s policy.  Now, removal of the exception requires an additional charge of 10% of the original rate for the title insurance, with a minimum charge of $150.00.  Lenders should be aware of this charge in order to properly explain it to their borrowers and manage borrower cost expectations, as much as is possible.

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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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