SBA 504 Blog

SBA Loan Requirements & Other Useful Commercial Loan Information

SBA 504 & 7a Loans, Green Commercial Loan Info & An Occasional Burst of Insight

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SBA Loan Interest Rates

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SBA loan interest rates

SBA Loan Interest Rates Online Can Be Wrong and Confusing

SBA loan rates for the 2 largest SBA programs – the 7a and the 504 – are dependent on numerous factors and most of the information you will find when searching for anything related to current rates will reflect MUCH higher rates than actual depending on the type of loan you are looking for, how much you are looking to borrow and what you intend to do with the funds from the loan.

Do a quick Google search for any of the following terms and you will get wildly different and often incorrect answers for the following:

  • SBA loan interest rates
  • SBA loan rate 2024 (or whatever year you are reading this)
  • SBA 504 Loan Interest Rates
  • SBA 7a Loan Interest Rate
  • Etc., etc.

If this is frustrating for me, it must be frustrating for those looking for a loan.

The SBA 7a loan program in particular, is an incredibly flexible loan that can be used to fund many different business needs.

The 504 loan on the other hand, is most frequently used for larger real estate transactions of between $1 million and $20 million.

What The Search Results Show

Below are actual Google search results for the term “SBA loan interest rates” for today – July 2, 2024 – and to the right of what Google displays, I will put some notes in bold and italics with my take on what is actually accurate.

A caveat: This post is mostly about how easy it is for borrowers to get incorrect rate info for SBA loans of more than $350K. I will also omit the search results for SBA loans that are less common like an EIDL loan or the Express loan.

Anyway, the first search result on Google for today shows Google’s “AI Overview” generated by their Gemini AI product, and here is the data:

• As of July 2024, interest rates for Small Business Administration (SBA) loans vary depending on the type of loan, the amount borrowed, and the repayment terms.

The above definition is correct.

• 7(a) variable rate: 10.75%–13.25%.

This rate may be accurate for a really small (think $50K) working capital loan for a startup business, but it is wildly incorrect for an SBA 7a loan of $350K or more for borrowers looking for the lowest interest rate on an SBA building loan, business purchase, partner buyout, etc.

For one thing, a few lenders actually offer rates well below the Prime Rate, which is currently 8.5%, and many others are at or close to the Prime Rate. Even the highest priced variable rate lenders who do the hardest deals will charge a max rate of 3% over the Prime Rate, which would be 11.5% today.

• 7(a) fixed rate: 13.5%–16.5%

Again, this rate is wildly incorrect for 7a loans above $350K for real estate or business acquisition/expansions or buyouts/buyins.

Again, I am assuming these posted interest rates are for small, unsecured loans, but they are presented online as if they are the rates that all 7a borrowers can expect. Fact is, the lenders we work with that offer fixed rates have rates between the high 5’s and high 8’s at the moment. Admittedly, these lenders only fund the best transactions, but there are many good lenders offering fixed rates at 1 to 1.5% above the Prime Rate as opposed to the ridiculously high rates posted above.

Also, there is no mention of what is a “fixed rate.” To most borrowers I suspect a fixed rate might mean something fixed long term like 15, 20 or 25 years, and there are definitely SBA lenders who actually offer that, but to many SBA lenders, a “fixed rate” usually means fixed for 5 years. This is not the search engines fault as I don’t believe they are capable of interpreting nuanced subjects, but suspect that Google Gemini will make this clear eventually.

• CDC/504 loan: 6.597%–7.063%

This above rate is actually accurate for the 504 loan rate for the 2nd mortgage.

The rates for the SBA 504 program can also be misleading, because the 504 is actually a 2-loan structure, and the first mortgage can be almost whatever rate a lender wants to charge, but search engines and 504 lenders frequently represent the 504 interest rate as if the loan is fully fixed for 25 years at “published” rate (the 2nd mortgage rate) without mentioning that the first mortgage could be a low fixed or a high floating rate or anything in between. Again, this rate is accurate for the 2nd mortgage, but not very helpful in light of what the blended rate and terms of both the first and second mortgage will be.

Again, I realize this is not Google’s fault and AI is not infallible, but if you look at the next 5 websites listed for the same search, you get more of the same.

For example, the #1 search result is the SBA website and here is the snippet that Google has picked up:

“Interest rates ; $50,000 or less, Base rate plus 6.5% ; $50,001 to $250,000, Base rate plus 6.0% ; $250,001 to $350,000, Base rate plus 4.5%.”

The following is only visible if you click through to the actual page of the SBA website and scroll to the section that discusses rates where it says:

“Interest rates for 7(a) loans are negotiated between the borrower and the lender, but are subject to SBA maximums, which are pegged to the prime rate or an optional peg rate. Interest rates may be fixed or variable.”

What it is NOT obvious even when reading the actual page, is the above interest rates are “maximums” meaning, they are the highest rates that lenders can charge.

Similarly, if I go over to ChatGPT and do the same search for “SBA Loan Interest Rates,” this is what is returned:

“As of July 2024, SBA loan interest rates vary depending on the loan type and amount. Here are the current rates:

SBA 7(a) Loans

  • $50,000 or less: Prime + 6.5% (maximum 15.0%)
  • $50,001 to $250,000: Prime + 4.5% (maximum 14.5%)
  • $250,001 to $350,000: Prime + 4.0% (maximum 13.0%)
  • More than $350,000: Prime + 3.0% (maximum 11.5%)

The current Prime Rate is 8.5%”

Again, just as above using Google, this wildly misrespresents what SBA loan interest rates actually are, as to read the above, you would be led to believe that the “current rate” for an SBA 7a loan of $350,000 or more is Prime + 3% and this is WRONG.

Prime + 3% is a worst-case scenario and is the highest rate the SBA allows a lender to charge a borrower, and yet here and many other places online, it is shown as the “current SBA loan rate.”

This is unfortunate and confusing – especially when you consider that a hefty percentage of SBA 7a loans are closed at a rate of between Prime and Prime + 1.5% – which is 8.5% to 10% at the moment.

This is due to the fact that most SBA loans are of “good to very good” quality, and there are numerous lenders who coincidentally offer “good to very good pricing.”

You will notice that 8.5% to 10% is WAY, WAY below the interest rates presented in the aforementioned Google and ChatGPT searches and this does not account for the loans that are closed below (sometimes way below) the Prime Rate.

And this is a problem.

Why High Interest Rate Lenders Actually Have a Place in the Market

I do feel like I need to address when a high rate lender is the right solution for a borrower. Not “crazy high” like above, but higher than what I consider to be a good rate for a decent loan.

There are actually many lenders who only charge at or close to Prime +3% for all of their 7a loans as it is their business model, and this is capitalism we are talking about, so it is not like they are not allowed to charge the maximum rate.

There is a method to why they do this however…

Typically, these lenders are what are known as “secondary market lenders” who sell the SBA Guaranty for profit and the higher the rate they sell, the more they make, so naturally they try to sell a high rate to everyone.

However, as odd as it sounds, these lenders are somewhat indispensable in the marketplace and they do a lot of business as there is a very real need for their services to do loans for borrowers who cannot qualify with more conservative, lower interest rate lenders.

More conservative lenders are typically unwilling to help borrowers who do not have “easy” or relatively easy loans and these “high-rate”  lenders frequently step up and get the job done.

As an example, we recently received a commitment from one of our high rate SBA 7a lenders for a $2 million business acquisition transaction that multiple previous lenders turned down. It is a purchase of a business where the cash flow is good, the borrower does not have any experience in the industry (but currently owns another successful business), has good credit, some liquidity/reserves and equity in a few properties.

All of these qualities (or lack thereof) are enough to have most conservative lenders take a pass, but what really turned off some of our lower rate lenders is the lack of down payment coming from the borrower, as we have structured this deal with NO down payment from the borrower. This is possible, because the seller (who is going to stay on for a year) is willing to hold a note for 10% of the purchase price on “full standby” for 24 months.

SBA Guideline Tip: Seller-held notes on “full standby” can be considered just like cash down payment for a borrower – you can read up on how it works by reading my full standby seller note post. This is one of the hyper-flexible features of the SBA 7a loan, and it is helping get lots of loans closed for borrowers who do not want to

 

part with a 10% down payment, but many conservative low-rate lenders won’t allow it.

This loan is approved, but the catch for the borrower is that she is having to accept an interest rate of Prime +2.5%, which is 11% today. The silver lining however, is that she can refinance in 2 years with a 1% penalty or after 3 years with no penalty.

FYI: the reason she has a minimal penalty if she refinances in the first few years, is because she is also purchasing real estate as part of the acquisition and it accounts for slightly more than 51% of the proceeds of the loan. Had she been purchasing just the business, there would be no penalty to refinance. 

And the possibly irony there, is that she will probably end up doing that with one of the more conservative SBA 7a lenders who do not peg their interest rates to the Prime Rate – and who would not do the loan now – but will be happy to work with her once she has a long enough track record of operating the business successfully.

This “SBA to SBA” refinance is possible because the SBA recently changed their guidelines to allow borrowers to refinance an SBA 7a loan with another SBA 7a loan, which can make a tremendous amount of sense for a borrower to take advantage of even if rates do not drop over the next few years.

Think about it…if a borrower has to settle for something like Prime + 2.5% today (11%), but they do well enough with the business over the next 2 to 3 years and have the tax returns to prove it, then even if rates have not moved, there should be numerous non-Prime Rate-based lenders whose rates are currently around 6.5 to 7% (and should be in the future as well) who would be happy to refinance a business with a proven operator at a future rate that could be 2, 3, 4 or even 5% lower than 11%.

Pretty brilliant, huh?

Anyway, the above example is why these higher rate lenders are needed, because they serve as a bridge lender of sorts, and they get the hard, but approvable deals done and the money they make in the secondary market helps offset the additional risk they are taking and the system works.

But the crazy thing is that even at Prime plus 2.5% to Prime plus 3%, these rates are nowhere near as high as the interest rates shown above when using the most searched for terms for SBA loan rates.

So the big disconnect is that a web search for “SBA loan interest rates” shows seemingly authoritative websites or “trusted” AI engines displaying the highest possible rate as the going rate, and this is again, unfortunate, as many current or prospective small business owners might get discouraged by the high rates that they see or settle for working with a lender offering a rate that is way higher than what they may be able to get with a little more looking.​

End of rant 😉

At Green Commercial Capital, we deal almost exclusively in SBA 7a and SBA 504 loans of $500,000 or more. Most 7a lenders will lend up to $5 million, but there are some who routinely approve loans up to $9 million – and occasionally $10 million – using a 7a loan structure. If you have any questions about SBA loan interest rates and what you may qualify for, what is available and why, then feel free to e-mail me at jking (at) green commercial capital (dot) com or give us a call at 1-800-414-5285.

100% Commercial Real Estate Financing Loans

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100% LTV Commercial Real Estate Financing
Understanding 100% LTV Commercial Real Estate Loans  

100% LTV commercial real estate financing is possible for successful small businesses.

Commercial real estate loans with no down payment are available for purchase, refinance or construction of a building for your business with nothing down and you can possibly finance all closing costs and even some other business debt and working capital using an SBA loan, but like all commercial lending programs there are caveats.

SBA Loan Requirements for No Down Payment Financing

100% LTV commercial real estate financing is purely an SBA offering from a small percentage of preferred lenders.  These are real estate loans for “owner occupied” commercial properties which means that your business must occupy at least 51% of the property.  These loans are NOT for investment properties, although there are some industries like self storage that are “investment-like” that are eligible and RV park financing is possible, although both of those industries require at least 10% down.

Major conditions for 100% financing eligibility:

  1. Established businesses only.
  2. Business must have solid, consistent cash flow showing enough income to qualify.
  3. Small business typically has to meet a DSCR (debt service coverage ratio) of 1.15x or better, but there are exceptions.
  4. All business owners must have good credit and good credit scores.  Poor past credit must be old, explainable and isolated, but we have helped many clients get an SBA loan after bankruptcy including a Chapter 7).
  5. Typically you must already have a history of ownership of the business seeking financing as new business acquisitions usually require 10% down, although there are a (very) few lenders who will allow you to buy a business with no down payment if you are buying a business just like the one you currently own.

Ideal candidates for 100% commercial real estate financing would be businesses with current lease payments close to what their new proposed mortgage payment would be, but this is definitely not a requirement as many borrowers can certainly qualify for larger loans with significantly more expensive payments as long as their business is profitable enough and the lender can get comfortable with the request.

Tenants Can Help Pay the Loan

Keep in mind that SBA requires a business “owner occupy” at least 51% of a building* and that the cash flow of the business be strong enough to qualify for 100% financing, but the other 49% of the building can be rented out.  So…it is possible that you could purchase a building that currently has one or more tenants or you could take on tenants and significantly reduce the amount of your monthly expenses.

* Technically, the SBA allows a borrower to put down just 5% on a business acquisition IF the seller of the business is willing to hold a second mortgage for the other 5% as long as it is on “full standby” for the life of the loan.  (Full standby means no payments to be made while you have the SBA loan).

100% Commercial Real Estate Financing

100 percent commercial loans are not a new thing for SBA lenders.  For many years, lenders have recognized that the down payment has been one of the biggest impediments to buying small business real estate, and many SBA and some conventional lenders have made no down payment loans available to certain types of businesses (typically dentists, doctors and veterinarians).

This post is about a more recent development where some lenders are allowing 100% financing for ESTABLISHED SBA-eligible businesses that are otherwise solid but do not have (or do not want to part with) the larger down payment that many lenders require.

Generic Buildings Preferred But Not Required

There are more options if the building to be financed is a multi-use or “general purpose” building that almost any type of business could occupy, but we have seen 100% commercial mortgage transactions where non-traditional buildings have been approved, for instance, a dog daycare business with a building and a little bit of acreage, assisted living facilities, residential board and care homes and franchised restaurants.

100% Financing “Plus”

Some lenders also allow for well over 100 percent financing and if your transaction is strong enough you can also roll in renovation costs, closing costs, other business debt and working capital.

100% Construction Financing 

It is also possible to get 100% financing for a commercial building construction loan.  This is possible with the same SBA program for if you need to construct a new building from the ground up.

In this case, you can purchase the land and construct the building all in one loan and one closing, although we have occassionally seen lenders offer a bridge loan for the land if there is a hard deadline to close on it first AND IF the lender has already issued a commitment for the construction/permanent loan.

Finance First 2 Years of Payments

One unique feature about SBA construction loans is that not only can you roll in all the closing costs and construction interest, but in some cases, lenders will allow you to finance some of the new mortgage payments if you have a business that requires some lease up/ramp up like an assisted living facility or a self storage.  In this case, it is actually possible to finance up to the first 2 years of payments for an expanding business constructing a new facility.

SBA Loan With No Down Payment For “Business Expansion”

Another way to acquire a property with no down payment is to leverage equity that exists on the balance sheet or in a property of an existing business.  The key is having enough equity on your balance sheet or enough equity in another property that you can leverage in lieu of a down payment.  Not many lenders are on board with this option, but it is available for stronger businesses/stronger borrowers and can result in some very good terms.

For this to work, the existing business must be solid and must purchase the new business/building using the same corporate structure with the same borrowers/guarantors.

This technique can also be used for a business expansion with no commercial property.  In this case, a lender may require a business valuation to substantiate that there is enough equity in your business to leverage your balance sheet to buy another business and the acquired business must become a part of the existing business, however, non-real estate deals are typically limited to a 10 year term and amortization rather than the usual 25 years.

SBA Loan No Down Payment – Other Options

Borrow the Down Payment

For transactions where it is not possible to get 100% commercial real estate financing (and a down payment is required), or in cases where it makes sense to borrow the down payment in order to get more attractive terms, the SBA allows you to get a loan for the required equity.  There are a few ways to do this:

  1. if you have another source of income or a spouse with income then as long as you can prove the ability to repay the borrowed money from that other source then it is allowable.  We have helped numerous clients do this as there are many types of businesses that with proper management do not require you to be 100% hands on, so if you have another source of income, a spouse with income or another job or business you can make this happen.
  2. In some cases, the business itself can borrow the money for the down payment.  This happens far less frequently, but if your business is solid then it is possible and this may allow you to get excellent terms.  As an alternative to true 100% financing, it might be possible that you could put down 10% and the lender might “give you back” roughly the amount of the down payment in working capital.  This is possible with businesses with strong enough cash flow and typically results in even better terms for the loan.

Retirement Account Rollover for Down Payment

SBA loans also allow (tax and penalty free) rollovers of certain retirement accounts such as SEP IRA’s or a 401k from a former employer to be used for the down payment.

Gifts and “Investors”

Gift funds are allowed with the SBA programs as well and you can also have “investors” – typically friends or family who would give you part of down payment in exchange for some ownership in the business.

Please contact me at jking (at) green commercial capital (dot) com if you have any questions or if you would like to see if you qualify.

You can also find out more about 100% commercial real estate financing on our website: here.

*60% in the case of ground up construction.

SBA Down Payment – Can It Be Borrowed?

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SBA Loan Down Payment SBA Loan Down Payment – When Can It Be Borrowed?

Depending on what you are borrowing for and which program you are using, you can borrow the down payment for an SBA loan.

  • You can borrow the down payment for SBA 7a loan if you have another source of income outside of the business that you are borrowing the money for AND if the payment on the borrowed money is something you can comfortably afford.
  • Your business can borrow the down payment on an SBA 504 loan as long as you can prove that the additional payment on the amount you borrow will not negatively impact your business.  This is less common but available to stronger, more established businesses, especially those with significant post closing liquidity.

Re: the down payment for the 7a loan, the Small Business Administration states the following regarding acceptable forms of down payment:

Cash that is borrowed through a personal loan to the business owner with repayment demonstrated to come from a source other than the cash flow of the business (the salary paid to the owner by the business does not qualify).

Typical sources of down payment:

  • A Home Equity Loan or line of credit
  • 401k from a former employer (these can be used tax and penalty free in certain situations)
  • A gift – usually from friend or family
  • An investor – in exchange for some percentage of ownership in the business
  • The Seller of a business or building can hold a portion of the down payment in the form of a loan*

Probably the most common scenario is to borrow against home equity as the payments are usually affordable and many borrowers have a spouse with income and some have either a “regular” job or another business or other source of income.  This is especially common when a business being acquired or started is the type where the business owner does not need to be on site full time.  For instance, a self storage business or a hotel or motel.

100% Financing – An Alternative for Existing Businesses

Keep in mind that there is a 100% financing option with the SBA 7a loan for existing businesses undergoing an expansion to new locations or buying real estate for the business.  It is not without it’s shortcomings, but it can be a very good solution for some businesses.  Click here for more info on 100% loans.

If you have a question about your situation feel free to e-mail me at jking(at)greencommercialcapital(dot)com.

*Seller financed debt must be on “full standby” for as long as you have the SBA loan.  Full standby means no payments can be made on the loan.  This sounds like it would not be useful, but it is very common as most Sellers are happy to get 95% of the proceeds of the sale at closing.

SBA Business Plan Outline

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Small Business Loan – Business Plan Outline

I thought it might be helpful to make available a basic outline for putting together a small business loan business plan, so here ya go:

Section 1 –  Overview of the Business

a) Briefly describe your business and what it does or will do.

b) Who are your customers/potential customers/clients?

c) Who is your competition?

d) What is your competitive advantage for this business?

e) How does your past education/business experience/passion relate to this business?

Section 2 – Business Structure and Management

a) What is the business structure? (i.e. “the business will be operated as an S-Corporation with Fred Flintstone as President and 50% owner and Wilma Flintstone as VP an 50% owner”).

b) Who will manage the day-to-day operations of the business?

c) Will the business employ any managers in addition to the owner?

Section 3 –  Information about the Location of the Business

a) Size and site? (i.e. “the business will be located in a 2,500 sf building across the street from the Slate Shopping Center which is located on the main street through “Bedrock”).

b) Information about any neighboring tenants, if any.

c) Access and parking? (i.e. “the building has 12 parking spaces with direct access from HollyRock Blvd”).

d) Surrounding area? (i.e. “the building is located within a stone’s throw of the nearby Rock Home Depot and a new Rockwal-Mart”).

e) Detail hours of operation and number of employees.

Section 4 – Outline of the Advertising & Marketing Strategy

a) Provide a plan to grow and maintain a customer base.

b) Provide a description of any “pre-opening” advertising blitz.

c) Provide a description of any planned or ongoing advertising & marketing strategy (i.e. “we plan to use a combination of website development, social media, traditional advertising, promotional events, community involvement, and Pterodactyl Airlines billboard advertising”).

Section 5 – Revenues and Pricing

a) Revenue assumptions (i.e. “we expect “____” number of customers/sales per day/week with an average average sale of $_.__).

b) Give detailed projections for any “Ramp-up period” and discuss whether or not sales will be seasonal.

c) Provide details on any salaries and whether or not the owner and/or manager will have a salary and if this figure included in the projections.

d) Discuss how were the assumptions calculated?  (i.e. “the revenues and expenses are based on comparable businesses: “Rockhead Quarry, Gravel and Tar,” “La Brea Gravel and Tar,” etc.).

e) Provide “industry specific” information (i.e. # of exam rooms (doctor or vet), # of tables (restaurant) or number of “Dino-cranes” (Gravel Pit).


SBA 504 Refinance – Is the 90% LTV Program Coming Back?

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June 13, 2013 – Update

The Creed Act is gaining momentum.  Yesterday the Senate Committee on Small Business and Entrepreneurship led by Senators Mary Landrieu and Jim Risch approved legislation that would bring back the 504 refi program.

The vote is a big step in the process that would lead to the return of the program, but the really big news is that the legislation would make the refinance provision a PERMANENT part of the 504 program.

Updated – March 15, 2013:

The SBA has just announced that they support the return of the refinance provision of the 504 program via the CREED ACT.  The Creed Act would renew the 90% loan to value “temporary” 504 refinance provision allowing many more businesses to re-structure their current financing and access capital while rates are still very low.

It remains to be seen if the legislation will be passed, but this is a big step in the right direction.

New Bill Gives Hope to Small Businesses

It’s way too early to know if a program that was helping a lot of small business owners refinance their commercial property and equipment loans will be coming back, but a new bill that allegedly has bi-partisan support has been introduced.

The legislation is called the The Commercial Real Estate and Economic Development Act (or CREED Act) and it was put forth by Senators Mary Landrieu and Jeanne Shaheen.

504 Refinance Program Expiration

For those who don’t know, the (temporary) 504 refinance program that was introduced a few years ago died an untimely and premature death this past September just as it was gaining traction with lenders and small businesses.

The program allowed business owners to refinance older, higher rate and usually shorter term debt with lower rate, long term debt, but it also allowed business owners to refinance at up to 90% of the appraised value of their buildings or equipment.

90% Loan to Value with Cash Out

The 90% guideline was a crucial component of the program as many business owners who had been unable to refinance conventionally due to lack of equity now had an option.

This new proposal would extend the program for 5 years and it comes at a time when lenders are getting healthy and many small businesses are starting to rebound from the recession.   It could be a huge catalyst for these businesses as having the ability to refinance business debt – both commercial real estate and other debt – could have a dramatic impact on cash flow, further helping their recovery.

Some of the Benefits:

  • Many businesses have maturing loans (and less equity) then they had before and they cannot meet their current lender’s guidelines for new loans or for an extension.  This gives business owners a more flexible option since they can finance all the way up to 90% ltv.
  • Business owners can access equity in their buildings to get working capital and to pay other eligible business expenses.
  • Rates are at or near all time lows.
  • It is a “zero subsidy program” meaning that fees paid by small businesses who get the loans pay for the program.  i.e. This program does not cost the taxpayers.
  • These are low risk loans for lenders making the odds of approval higher than with conventional financing.

Click here for a full rundown of the current refinance provisions as well as the full anticipated guidelines of the new legislation.

SBA Loan Approval – What Are Your Chances?

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It Depends

When you apply for an SBA loan – or any loan – your odds of approval depend on a lot of factors.  Assuming you have most of the right qualifications (the 5 C’s of credit, etc.), a lot of it depends on the lender you are seeking financing from.  Specifically, what is their situation and how likely are they to approve your loan?

Well, the answer is: “It Depends”

It depends on the asset you are looking to finance.  Is it a multi-use building that could be used for almost any business or is it a circular fondu restaurant that rotates around a giant fish tank.

Hint: “multi-use” is good.

It depends on whether your banker is an experienced SBA lender or if they just dabble in it.  A lot of lenders have “discovered” SBA lending in the last few years and ‘aint exactly great at it.   (Experienced = Good/Dabbling = Bad).

It depends on how the banks current portfolio of loans is performing.  Does the bank have too high a concentration of one particular type of asset.  Maybe you are trying to buy a self storage facility but the bank just had 3 self storage facilities default on their loans.

It depends on the banks capital.  How much can the bank actually lend?  Will your request be too large for them?

It depends on the banks perception of the health of the economy.  Does the bank feel the economy is strong enough in your area to support your business or are they running scared and not actually lending?

It depends on the banks future plans.  Are they in it for the long haul or are they positioning themselves to sell?  (Either scenario could be good or bad).

It depends on how well the bank came through the carnage of the Recession?  Are they still licking their wounds, circling their wagons, covering their as…well, you get the point.

It depends on whether the FDIC is the banks Puppetmaster.  Is the banker putting on a good face and telling you that they are lending when in reality they are only lending to those who don’t need it because the FDIC is behind the scenes telling them what they can and cannot do?

My point?  Odds are pretty good that since you already have a business to run, you might not be up on all this “dependent” stuff and you might need someone to do the dirty work for you.  (Or at least someone with first hand knowledge of which bank is doing what).

So how do you know which SBA lender you can “depend” on…well that depends on who is helping you find that lender.  Sorry, couldn’t resist just one more “depends.”  (Okay, maybe 2).

Sometimes, there’s an easy solution because you have a business that has been thriving and your local community bank is ready,willing and able to help, but more and more that is not the case and you just might need help finding that lender who is right for you…and that is when you might want to enlist the help of an SBA Wingman 🙂

SBA Loan Rates: “Real” SBA Fixed Rates Available

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(Blended) Fixed Rates In High 4’s to Low 5’s Now Available

Most people who research the SBA 504 loan program for commercial real estate understand that it is heavily advertised as “fixed rate” financing.  This is both true and false, but it is more true now than ever before…at least for a while.

The SBA 504 program consists of a first and second mortgage.  The 2nd mortgage is always fixed at a “below market” rate and it is primarily what makes the program so attractive.  (See below for current rates as of the date of this post).

7a Rates

The 7a program is the other SBA program that can be used for financing commercial real estate.  It is usually a variable rate pegged to Prime amortized over 25 years and it can also be fixed for 5 or more years at a time, but that will be the subject of another post.

The Fake 504 Fixed Rate

Historically, most lenders will offer a first mortgage that is fixed for 5 years (or so) at a time and they (legally) advertise it as a “fixed rate,” but we all know it isn’t and that is why I typically refer to the program as “mostly fixed”  (intelligent sounding, I know).

But now there is a new option IF you have a “multi-purpose” or “multi-use” building – a new true/real 25 year fixed rate 504 first mortgage loan.  If you are unfamiliar with SBA financing it is only for “51% or more owner occupied business property” – please get in touch if you need clarification on this: jking (at) green commercial capital (dot) com.

It is not available for “single use” properties like hotels or self storage, but any owner occupied building that could house multiple types of businesses should be eligible including medical and dental offices, warehouses, manufacturing facilities, light industrial buildings and even an office building where your business occupies at least 51% of the space.

The rates for the first mortgage are very good at the moment – 5% to 5.5% depending on loan size, length of prepay penalty, etc.

504 2nd Mortgage Rates

The rates for the 20 year fixed rate 2nd mortgage as of today (they change monthly) are as follows:

4.462% for a purchase or acquisition loan

4.665% for a refinance loan

The 10 year fixed rate 504 loan is currently:

3.757%

4.003% for a refinance

The 10 year loan is typically used for equipment financing transactions.

Great Blended Rate

The combination of the 2 fixed rate loans is hard to beat – a 25 year first mortgage in the low to mid 5’s and a second in the mid 4’s – and unless something really dramatic happens to our economy, you shouldn’t need to worry about financing your building ever again.

For more information about 504 loans: www.greencommercialcapital.com

SBA 504 Refinance Loan Program Going Away?

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SBA 504 Refinance Program A Success, But…

The temporary SBA 504 refinance program has kind of suddenly become a big success (after a very sloooow start) and it has helped many small business owners refinance their current loans, consolidate debt and reduce their monthly expenses, but time could be running out for business owners to take advantage of this program because it is set to expire September 27th.

This is too bad, because it has provided a rare opportunity for business owners to get long term 90% loan to value financing on their buildings – half of it fixed for 20 years at historically low rates.

Industries that were hit hard by the recession like hospitality and manufacturing have benefited from the program.  In fact, SBA loans to refinance hotels were very hard to come by until this program started to take hold with lenders.

504 Refinance Deadline Looms

The program – originally part of the Small Business Jobs Act – was supposed to last 2 full years through September of this year, but much to everyone’s chagrin it does not look like it is going to be extended.

The reason for all of the “chagrinning” is that the program in it’s current form didn’t even hit the streets until 14 months after it was supposed to…which means it didn’t do a lot good for 14 of the 18 months it’s been available to date.

The delays in rolling out the program are immaterial at this point, but what is important is that deals are now getting done and the program has sparked a lot of lending and pumped life into some sectors of the commercial real estate market.

Financing of Business Expenses

One of the reasons the program has gained so much traction lately is that the SBA tweaked the program last Fall to allow “cash out” for legit business expenses including such things as business credit card debt, equipment purchases, building renovations, repairs and maintenance, salaries, rent, etc.  Unfortunately, the program is set to expire  just as word is getting out about all of the great things you can use the program for…and just when lenders are starting to get healthy.

So, if you own a building and you run your business out of it and you think you could benefit from refinancing, then you might want to take a fast (but thorough) look at the 504 refinance program before it dies an untimely death.

For more detailed info on the program guidelines, click here.

A Glimmer of Hope

3 Senators have just introduced a new bill – S.2364 – that would extend the refinance provision for another year.  Senators Olympia Snowe, Mary Landrieu, and Jeanne Shaheen have introduced the legislation in the hopes that the program could be extended.

Word on the street is that it is not likely, but it’s a new bill, so you never know…stay tuned.