It’s finally here! After hearing about it for over a year, the SBA has announced that the 25 Year 504 option is available for loan applications approved after April 2, 2018.
Like the 10 and 20 Year 504 options, the loan is designed for small businesses to finance commercial real estate or large equipment for use in business operations. The extended amortization option on the 504 loan will help borrowers to reduce monthly loan payments. Here are some initial details that have been provided:
- The 25 Year option is available for New loan applications approved after April 2, 2018, previously approved loans can not be changed to the 25 Year option.
- The Third Party Lender loan has to have a minimum term of 10 years.
- The first 25 year debenture is expected to be funded July 2018, pricing for the initial 25 year debenture will have a spread no wider than 35 basis points above the current 20 year rate. For example, based on the March rate of 4.99%, an indicative 25 Year rate would be 5.34%. (25 year rate pricing will be based upon supply and will be modified once demand for the option is established).
- Prepayment penalty for the 25 Year loans will be 10 years, the same as the 20 year option.
Give us a call to discuss how this new option can benefit your borrowers!