July 20

How Are SBA 504 Interest Rates Determined?

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How Are SBA 504 Interest Rates Determined?

SBA 504 interest rates are set by the market. But it's complicated. In short, there are 2 pieces: Bank and CDC, or Certified Development Company.

The bank sets its own rate. That rate is negotiable between you and the bank. Most often, the bank rate offered on an SBA 504 loan is lower than you'd get with a typical commercial loan.

The bank provides 50 percent of the 90 percent (remember, you pay in 10 percent) and they get the first lien.

The CDC funds 40 percent. They get the second lien. However, the rate is not set on the CDC loan until the SBA sells the debenture to investors – it's at that time the interest rate is established.


Tags

commercial loans, creative financing, hard money, real estate, real estate investing


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