8.11.10: SBA 504 Loan Interest Rate Drops Below 5% for Small Business Borrowers*

The Small Business Administration’s (SBA) 504 loan program is providing long-term, fixed-rate financing for the purchase of commercial real estate at one of the lowest interest rates 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 current low interest rate to purchase 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 continued to fall to a low of 4.93% this month. The August bond sale to investors that funded SBA loans was sold at a rate of 3.52%, which resulted in an effective interest rate – including fees – of only 4.93%, one of the lowest since the program began in 1986.

The SBA’s 504 loan program has funded nearly $60 billion in loans to growing small businesses over the past 24 years. Right now, the interest rates are low and one of the best aspects of an SBA 504 loan is the low down payment — typically only 10% — required by a borrower. CDCs across the country are busy helping small business borrowers who are taking advantage of these record low interest rates to purchase, build, or expand their own facilities.

Recent loan data has shown that a large percentage of SBA 504 borrowers are professional practices.  The greatest concentration of loans has been to physicians, dentists, veterinarians, lawyers and accountants.   Chris Crawford, NADCO President, observed, “It’s not surprising that accountants and lawyers recognize the benefits of SBA 504 loans, but it’s gratifying to see so many other professionals also realizing that owning their own building to fix their business occupancy costs is a very savvy financial move. More business owners would be wise to make similar investments.”

Jean Wojtowicz, Chair of the NADCO board and Executive Director of Indiana Statewide CDC, observed “a commercial loan below 5% is an incredible rate for 20-year, fixed-rate money. 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.”

Chris Crawford said, “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 today. Our CDC members are working hard with our bank partners, and we have money available for sound, small business real estate projects.”

*This story contains material from the National Association of Development Companies (NADCO).

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