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SBA 504 Loan Interest Rate Drops Below 5% for Small Business Owners

August 18, 2010View for printing

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, through Certified Development Companies (CDCs) such as Big Sky Economic Development in Billings, 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 Certified Development Companies (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%. This low sale price resulted in an effective interest rate – including fees – of only 4.93% for borrowers this month. This interest rate is one of the lowest since the program began in 1986.

The Small Business Administration's (SBA) 504 loan program provides long-term, fixed rate financing for commercial real estate, and has funded nearly $60 billion in loans to growing small businesses over the past 24 years. Not only are the interest rates low right now, but one best aspects of an SBA 504 loan is the low down payment required by a borrower. The down payment is typically only 10%. Big Sky Economic Development and 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 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 Certified Development Corporation, observed that " 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 went on to say, "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," Crawford said. Brandon Berger, Finance Director at Big Sky Economic Development in Billings, seconds these comments. “The SBA 504 loan program provides a tremendous benefit to both small businesses looking to expand and to our lending partners. The combination of a smaller down payment, long-term fixed rate financing and a subordinate position to the bank, is a win-win for everyone involved.”

Big Sky Economic Development is a Certified Development Company located in Billings, MT. The EDC arm of the organization originates and services SBA 504 loans throughout the state of Montana. The SBA 504 loan program serves the small business community by providing long-term, fixed rate financing for the acquisition and or renovation of land, owner occupied commercial property and equipment. For more information on the SBA 504 loan program and Big Sky Economic Development, please contact Brandon Berger at (406) 869-8403, or visit us at http://www.bigskyeconomicdevelopment.org.
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