To those of you who may have been following the 10 year T-bond market, you have witnessed an unprecedented rise in the underlying interest rate for the SBA 504 loan program, that has occurred over a short timeframe. Over the course of nine months, the program has gone from its historic low of 4.01% in December 2012 to 5.7% in September 2013. While 5.7% fixed for 20 years is still a great interest rate - and lower than the program average of 6.5% - it is significantly higher than an interest rate the low 4s, as it has been for much of the last year and a half.
So, the question remains - Is the SBA 504 Loan Program still a good deal for businesses at this higher interest rate? The answer is yes. An updated Cost Comparison worksheet has been uploaded to the Tools section of our website. A few examples of the savings in which the SBA 504 loan program can result: for a $600,000 project, utilizing the SBA 504 loan program would save a business almost $23,000 over the life of the loan; for a $1,000,000 project the savings would be $41,000 over the life of the loan; and for a $2,000,000 project the savings would be $85,000 over the life of the loan.
The other benefit to the borrower about utilizing the SBA 504 loan program is the low down payment requirement. Most loans can be qualified for only a 10% down payment, while most conventional lending requires an average of 20% down payment. While this difference is included in the Cost Comparison worksheet, the lower down payment also benefits the business by increasing the amount of working capital available to them to manage their growth. Typically, businesses that are purchasing buildings are growing into a larger space, which requires increasing inventory and employees. By leaving more money in the business' pockets, those businesses have the liquidity they need to grow.
So, yes Virginia, the SBA 504 loan program IS still a good deal.
So, the question remains - Is the SBA 504 Loan Program still a good deal for businesses at this higher interest rate? The answer is yes. An updated Cost Comparison worksheet has been uploaded to the Tools section of our website. A few examples of the savings in which the SBA 504 loan program can result: for a $600,000 project, utilizing the SBA 504 loan program would save a business almost $23,000 over the life of the loan; for a $1,000,000 project the savings would be $41,000 over the life of the loan; and for a $2,000,000 project the savings would be $85,000 over the life of the loan.
The other benefit to the borrower about utilizing the SBA 504 loan program is the low down payment requirement. Most loans can be qualified for only a 10% down payment, while most conventional lending requires an average of 20% down payment. While this difference is included in the Cost Comparison worksheet, the lower down payment also benefits the business by increasing the amount of working capital available to them to manage their growth. Typically, businesses that are purchasing buildings are growing into a larger space, which requires increasing inventory and employees. By leaving more money in the business' pockets, those businesses have the liquidity they need to grow.
So, yes Virginia, the SBA 504 loan program IS still a good deal.
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