September 2010 Newsletter

September's SBA 504 20-year effective rate is 4.62%. 10-year bonds were also sold this month. The September SBA 504 10-year bond effective rate was 3.676%. (Rates may vary slightly based on approval date.)

The SBA year wraps up at the end of September, which means there will be a few changes beginning October 1, 2010 for new SBA 504 prospects. The big change everyone will want to make note of is the Ongoing SBA fee. This fee is built into our effective rate (currently 4.62%) and is increasing 36 basis points beginning October 1st. SBA is also coming out with a new Standard Operating Procedure (SOP). We have detailed some of the changes affecting 504 loans below.

Increase of Ongoing SBA Fee

Beginning October 1, 2010 the ongoing SBA fee will increase from 0.389% per annum to 0.749% per annum. This is an increase of 36 basis points.

The rate quoted every month is an effective rate, which includes three ongoing fees: the Certified Development Company fee, the Colson Services fee, and the SBA fee. The increase to the SBA fee will essentially increase the rate by about 1/3%, which will be reflected in slightly higher monthly payments.

What is important to note is that this only affects Authorizations approved AFTER October 1, 2010. Any borrower that has an Authorization dated prior to October 1, 2010 will have the lower SBA fee of 0.389%. The loan closing date will have no effect on the fee.

Therefore, if you have an SBA 504 application that is close to completion or in the SBA Loan Queue, we recommend you give our office a call so we can get an Authorization as soon as possible to be dated before October 1st!

SOP 50-10(5), version C

The latest version of SBA's SOP (50 10(5) c) will take affect on October 1, 2010. Some of the key items that will likely change are below:

Borrowed Equity Contribution: SBA has eliminated the requirement that if Small Business borrows its equity contribution, e.g., through a home equity loan, that the Small Business must demonstrate repayment from sources other than the cash flow of the business.

Third Party Lender Amortization: Amortization of principal and interest on the Third Party Loan may begin prior to debenture funding as long as the Borrower consents in writing with the Third Party Lender.

Form 912/Personal History Statement: The Form 912 is required for key people hired to manage the Small Business on a day to day basis, even if the key management does NOT have ownership. This is especially true if there is an absentee owner. The Form 912 is not required for other positions.

FY 2011 Ongoing SBA Fee: The fee increases to 0.749% as explained above.

"Financing Growing Businesses in Michigan Since 1981"

May-12