How Interest Rates Are Determined For The SBA 504 Loan Program

SBA 504 Loan Rates

The SBA 504 guaranteed loan program to purchase commercial real estate is comprised of two loans. One provided by an SBA Preferred Lending Partner and another by an SBA Community Development Corporation (CDC).

SBA Guaranteed 504 real estate loan rates on the second portion also referred to as the Debenture are fixed based on the 5 year and 10 year treasury index rate plus a predetermined fixed rate and an additional percentage rate to capture ongoing annual fees.

For example, the rate for an SBA 504 guaranteed real estate loan with a fully amortizing 10 year fixed rate period as of today is the 5 year treasury rate which is 1.86% plus the fixed rate of .38% plus ongoing annual fees of 1.7% for an all in rate of 3.94%.

An SBA 504 guaranteed real estate loan with a fully amortizing 20 year fixed rate period as of today is the 10 year treasury rate which is 2.12% plus the fixed rate of .48% plus ongoing annual fees of 1.7% for an all in rate of 4.3%.

Additional Terms

SBA 504 guaranteed loans are fully amortizing without a balloon payment. That means the loan is considered paid in full when the last payment is made at the end of 10, 20 or 25 years.

Rates and terms on the first loan portion also referred to as the 1st Trust Deed provided by the bank, credit union or non-bank lender vary and may contain variable rates, financial covenants and a balloon payment.

My SBA Loan Pro

The My SBA Loan Pro Podcast is hosted by Your SBA Loan Pro, Ryan Smith. In each episode Ryan provides valuable information and best practices regarding the SBA loan program.

Each episode is approximately one minute in length and addresses topics related specifically to SBA 7(a) and 504 loan programs to purchase real estate, acquire a business or franchise and obtain working capital.

You’re encouraged to listen and subscribe to ensure you’re notified each time a new episode is available. Ryan publishes a new episode weekly on Tuesday mornings, unless he’s kidnapped to a deserted island of course.

You can listen and subscribe on your favorite platforms including Apple Podcasts, Spotify, Google Podcasts, Anchor and Stitcher.