In this season of rising rates, it’s time to think 504. The October 2022 rates for SBA 504 Loans are higher than they were last month, a trend consistent with recent federal interest rate hikes. SBA 504 rates and the 10-Year Treasury have followed a similar track historically. Therefore, given that the 10-year treasury yield is increasing along with the Treasury discussing increasing the federal funds rate, it’s no surprise we’re seeing higher SBA 504 interest rates. Read more …
October 2022 Rates
- 25-Year: 6.44%
- 20-Year: 6.36%
- 10-Year: 5.60%
The increase in rates highlights a crucial benefit of the SBA 504 Loan Program…locking in today’s fixed rates for a long loan term (up to 25 years). Here are four reasons why the SBA 504 Loan Program is crucial when interest rates are on the rise.
Four Reasons Lenders Should Think 504 When Interest Rates are Rising
We all know the 504 Loan Program helps drive business growth and expansion in our local communities. However, as rates continue to rise and credit boxes get tighter, the 504 can help lenders reach their goals too. Below are four reasons lenders should think 504 when interest rates rise.
Reach New Clients
- MANUFACTURING/INDUSTRIAL – recycling facilities, food manufacturing, steel production, packaging companies, commercial printers, machine shops, freight & transport, wholesalers, etc.
- MEDICAL/PROFESSIONAL – doctor’s offices, veterinarians, dentists, attorneys, accountants, chiropractors, architects, graphic design/marketing businesses, physical therapists, etc.
- RETAIL/SERVICE – restaurants, retail stores, health clubs, child care services, pet care services, car washes, farmers markets, boutiques, auto repair shops, photography studios, etc.
- OTHER – funeral homes, assisted living, recreation/sports facilities, mini-storage facilities, etc.
Facilitate Growth and Expansion
- REAL ESTATE – land, building(s), new construction, leasehold improvements
- EQUIPMENT – costs associated with the purchase, transportation, dismantling, or installation of machinery and equipment can be included in a 504 loan. Equipment financing can either be stand alone project (useful life >10 yrs) or as part of a larger, more comprehensive 504 project.
- GREEN ENERGY UPGRADES – new builds with sustainable energy, energy efficient upgrades, energy generating equipment
Mitigate Risk, Help Increase Strength and Stability
- MITIGATE RISK – Lenders have first lien position and typically a 50% loan-to-value ratio, minimizing collateral risk
- REFINANCING – existing (504-eligible) real estate and/or equipment loans can be refinanced into a long-term, fixed rate 504 loan. This alleviates balloon payment concerns and can minimize occupancy expense fluctuations.
- WORKING CAPITAL – with 504 refinancing, borrowers can elect to get cash out for qualified business expenses, such as: salaries, rent, repairs, inventory, utilities, credit cards, lines of credit, etc.
Obtain Community Reinvestment Act Credit
- CRA CREDITS – banks that participate in SBA 504 loans are eligible for Community Reinvestment Act (CRA) credit on certain projects.
Growth Corp is here to provide ongoing SBA 504 loan support and training. So whether you want to schedule a time to go over a potential project, estimate a payment with our 504 payment calculator, or set up a presentation for your lending team, we’re here to help you reach your goals. Contact any member of our lending team today!