Alan Bussey
Member
The interest rate for SBA 504 2nd lien fixed rate loans is announced once each month.
Today, the national association of firms that provide these 2nd lien loans announced that the effective interest rate for 504 second lien loans funded in September is just 5.143% fixed for 20 years. This is the lowest rate EVER for a 504 second lien loan.
The 5.143% fixed rate assumes that the borrower pays the lower of two servicing fees to the 2nd lien lender. If the borrower pays the higher of the two servicing fees, the effective 20-year rate is 5.6%, still very good. Right now with these loans it is a borrower's market (believe it or not), so you can expect to pay the lower servicing fee and lower 5.143% effective rate.
The 2nd lien loan interest rate is set early in the month that the permanent 2nd lien loan is funded, which is 3 or 4 months after construction is completed or after purchase of the car wash (if a purchase).
One reason that the 20-year fixed rate is so low is that several fees have been temporarily waived as part of ARRA (the Economic Stimulus Plan).
Under the 504 program the first lien lender provides 50% of the Total Project Cost. For a car wash (a special purpose property) the 2nd lien loan is typically 30% or 35% of the Cost, and the Down Payment is 20% or 15%, depending upon whether the car wash is a startup or an additional location for someone already in the car wash business.
It is the bank's low 50% proportion (low risk) that induces it to make the first lien loan to you.
In addition to the record low interest rate, the origination fees for the second lien loan have also been temporarily slashed, and are now less than 1% of the second lien loan amount.
To take advantage of the temporary low loan costs the 2nd lien loan must be approved before the Stimulus funding for the fee reductions runs out in late October or November. It takes time to wind through the loan approval process. Start now.
Alan Bussey
Today, the national association of firms that provide these 2nd lien loans announced that the effective interest rate for 504 second lien loans funded in September is just 5.143% fixed for 20 years. This is the lowest rate EVER for a 504 second lien loan.
The 5.143% fixed rate assumes that the borrower pays the lower of two servicing fees to the 2nd lien lender. If the borrower pays the higher of the two servicing fees, the effective 20-year rate is 5.6%, still very good. Right now with these loans it is a borrower's market (believe it or not), so you can expect to pay the lower servicing fee and lower 5.143% effective rate.
The 2nd lien loan interest rate is set early in the month that the permanent 2nd lien loan is funded, which is 3 or 4 months after construction is completed or after purchase of the car wash (if a purchase).
One reason that the 20-year fixed rate is so low is that several fees have been temporarily waived as part of ARRA (the Economic Stimulus Plan).
Under the 504 program the first lien lender provides 50% of the Total Project Cost. For a car wash (a special purpose property) the 2nd lien loan is typically 30% or 35% of the Cost, and the Down Payment is 20% or 15%, depending upon whether the car wash is a startup or an additional location for someone already in the car wash business.
It is the bank's low 50% proportion (low risk) that induces it to make the first lien loan to you.
In addition to the record low interest rate, the origination fees for the second lien loan have also been temporarily slashed, and are now less than 1% of the second lien loan amount.
To take advantage of the temporary low loan costs the 2nd lien loan must be approved before the Stimulus funding for the fee reductions runs out in late October or November. It takes time to wind through the loan approval process. Start now.
Alan Bussey
