SBA 504 Loan Program: August 2023 Updates & Rates

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This article is a summary of a YouTube video "SBA 504 Loan Program: Updates and Rates for August 2023" by Investor Financing Podcast
TLDR The SBA 504 Loan Program offers favorable rates and has made changes to simplify the application process, making it an important tool for small businesses to scale up and stimulate the economy.

Key insights

  • 📝
    The SBA now categorizes applicants into two levels: the operating company and the real estate holding company, based on ownership percentages, streamlining the loan application process.
  • 💼
    The removal of the SBA franchise directory means that any potential franchise is now potentially eligible for SBA 7A or 504 loans.
  • 💼
    The SBA 504 Loan Program has made a significant change, reducing the requirement for full standby from the seller to just two years, which can have a major impact on business acquisitions.
  • 💼
    The SBA is making significant changes to the affiliation versus management rule, removing the need for SBA to review management agreements, which could have a substantial impact on the loan program.
  • 💰
    The SBA 504 Loan Program offers competitive rates, with prime plus one being a favorable option for borrowers.
  • 💼
    The 504 loan program allows for larger transactions, with deals up to $20 million possible, but lenders like banks would have to take on more risk when reaching the $5 million cap on the SBA portion.
  • 💰
    SBA 504 green program offers a lot of options for businesses, allowing them to access up to $6.5 million in aggregate, making it a valuable resource for growth.
  • 📉
    By driving interest rates down to around 6% through a 504 refinance, it could offer a substantial reduction in costs for sponsors and business owners, providing much-needed relief in the current economic climate.

Q&A

  • What are the updates and rates for the SBA 504 Loan Program?

    — Carrie discusses the monthly updates and rates for the SBA 504 Loan Program, highlighting that there are many updates and overall they are positive.

  • Have the rates for the 504 loans changed in August 2023?

    — The rates for the 504 loans in August 2023 have only increased by one tenth of a percentage point compared to July, remaining essentially the same.

  • What is the biggest change in the SBA 504 Loan Program?

    — The biggest change in the SBA 504 Loan Program is the simplification of the affiliation process, where the applicant's ownership of other businesses is now categorized into two levels.

  • How is affiliation determined in the SBA 504 Loan Program?

    — Affiliation is determined by whether the operating company or real estate holding company owns another business, and if an individual applicant owns another company with the same business code, it is considered an affiliate.

  • What are the requirements for borrowers with multiple entities in different business codes?

    — Borrowers with multiple entities in different business codes do not need to provide tax returns for those entities, simplifying the process, but if the entities are in the same business code, financials are still required.

Timestamped Summary

  • 📈
    00:00
    The SBA 504 Loan Program rates for August 2023 have only increased slightly, while the biggest change is the simplified affiliation process for applicants' ownership of other businesses.
  • 📝
    02:53
    Borrowers with multiple entities in different business codes do not need to provide tax returns for those entities, simplifying the process, but if the entities are in the same business code, financials are still required.
  • 📝
    04:44
    The SBA franchise directory has been eliminated, making any franchise eligible for SBA loans, and partial buyouts are now possible with a six-month look back and the seller as a guarantor, although it is not as advantageous as initially believed.
  • 📝
    07:20
    The SBA has made changes to the 7A loan program, reducing the stand-by life to 2 years and adding more flexibility for SBDCs, while also focusing on small SBA loans for buying businesses worth $200k-$300k.
  • 💼
    09:56
    The SBA 504 Loan Program offers favorable rates for real estate loans, including smaller loans and non-collateralized businesses, as discussed in a deal structure for a 10 million dollar Cold Storage Warehouse in South Texas.
  • 📝
    12:29
    The SBA 504 loan program has specific requirements for special purpose properties and startups, offers better pricing for fixed rate and construction projects, and a guideline change allows non-profits with a for-profit division to be eligible for SBA loans.
  • 📝
    15:20
    Done curious bank is an aggressive 504 lender that loves real estate deals, especially construction financing and self storage, and SBA loans are an important tool for small businesses to scale up, with options like the SBA 504 green offering up to 6.5 million in aggregate, making it a key product to move the economy during tough times when banks are tightening.
  • 📝
    17:34
    Possible forthcoming changes to the 504 review Finance rules could create more opportunities for refinances, particularly for hospitality businesses with short-term debt, potentially leading to significant savings for business owners.
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This article is a summary of a YouTube video "SBA 504 Loan Program: Updates and Rates for August 2023" by Investor Financing Podcast
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