SBA 504 Interest Rates | May 2024 | 10 Yr:  6.908%, 20 Yr: 6.656%, 25 Yr: 6.555% *rates may vary Learn More »

The SBA 504 in a Rising Interest Rate Environment

Nov 15, 2022

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Inflation. Price increases. Rising interest rates.

These topics seem to be on everyone’s minds today… especially as small business owners continue to navigate the current economic conditions and stabilize or grow their business.

While these conditions have a significant impact on businesses and communities, the SBA 504 loan program can still be a great financing tool for those looking to grow or expand. Here is a quick look at what the SBA 504 program looks like in a rising rate environment and how the program can benefit small businesses during this time.

Interest rates are still adjusting – Prior to the COVID-19 pandemic, 504 rates hovered around 4-5% for nearly a decade, which is the lowest the program had seen since inception. While it appears that SBA 504 interest rates have drastically increased over the past few months, the rates are actually adjusting back to pre-pandemic levels and remain lower than the historical average.

*the chart above shows historic interest rates for the SBA 504 program since 2002

504 interest rates are below-market – The 504 rates are not the only rates increasing. As the economy continues to adjust, other conventional interest rates are rising as well.  Because the SBA 504 program is government-backed, the program offers below-market rates lower than those offered by conventional programs.

The SBA 504 program helps preserve cash flow – Despite the rising rates, the SBA 504 loan program is still a great deal for businesses and allows business owners to preserve cash flow during these economic changes.

  1. SBA 504 interest rates are fixed, meaning business owners will lock in rates throughout the life of the loan at a below-market value. This can save businesses thousands of dollars in the long run, especially in a rising interest rate environment.
  2. The 504 programs offers 10-, 20-, and 25-year repayment terms, allowing businesses to spread out their payments and leave more for cash flow in their day-to-day operations. The program does not have any balloon payments, so businesses will not have to worry about any extra payments at the end of their term and can lock in a rate and payment for the life of the loan.
  3. Businesses who utilize the SBA 504 program have a minimum 10% down payment, which is 15-20% lower than most conventional loans. Instead of providing that money up front, businesses can save and use that money now in their daily business operations.

The current economic conditions do not have to stop businesses from continuing to grow, expand, and thrive.

Contact a loan officer with any questions or to learn how to secure a fixed interest rate while they are still low.