SBA Monthly Update - August 2011

2011 SBA eblast header

Your Monthly Update on Rates and Industry News

August 2011

Rates Nearing Lowest Since Program's Inception

The past week has certainly been volatile in the shadow of Standard & Poor's downgrade of the United States debt. Many have been worried it could negatively impact lending since the Small Business Administration's (SBA) 504 loan rates are set through the sale of a debenture similar to U.S. Treasuries. However, the recent uncertainty in the U.S. stock market and in Europe has actually driven demand for the treasury bills and SBA504 debentures.

In August, rates dropped 44 basis points to 4.985 percent (20-year fixed)--the lowest rates have been in nine months and significantly lower than historic standards. With the high demand driving down rates, now is a great time to take advantage of the SBA504's fixed loan program.

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August Headlines:

SBA504 Loan Interest Rates Drop Below 5% for Small Business Borrowers

The SBA504 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.

Financing Your Small Business: 504 Loans

If you're an entrepreneur buying a fixed asset like land, buildings or long-term equipment, look into a 504 loan.

Big Banks Shrinking as SBA Lenders

Nudged by stimulus provisions that reduced fees and increased guarantees, banks made a record amount of SBA-backed loans in 2010.

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August Rates

4.99%
SBA 20-year fixed

4.26%
SBA 10-year fixed

Tip of the Month: Financeable Equipment

SBA504 lenders think in terms of "capital" equipment. In other words, the 504 loan program is used to finance long-term facility and equipment. SBA uses the "useful life" definition, which generally requires a useful life of 10 or more years to qualify. Examples include printing presses, manufacturing lines, and other major equipment. The minimum equipment purchase price is approximately $125,000. Equipment with a useful life of 20 years can also be financed using the 20-year term. Small equipment (i.e. furnishings in a hotel, ashtrays in a restaurant, etc.) can be included, but cannot exceed 20 percent of the overall project. Exceptions can be made with a good argument. Vehicles are not financeable under the 504 program.