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Recent Upward Trend in 504 Rates |
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Although 504 rates seem to have risen at an unusually fast rate over the last two months, our product has fared better than other bonds,
principally as a result of the full faith and credit guarantee. According to our industry fiscal agent, the 504 product fared well in “choppy market conditions” as a result of the federal
guarantee and the broadened investor base for our product. Spreads have been at record low levels for the 504 product due to the demand for high quality investments. The 2nd quarter of 2007 produced the worst returns in 15 months for bond and treasury investors.
With market concerns about rising inflation, questions about whether the Fed will stay on the sidelines, changes in other Central Bank fiscal policies, and fallout from the sub prime mortgage problems, investors are looking for improved returns.
Hence, spreads have widened over the last two bond sales. We also experienced an increase in treasury rates (37 b.p. in the last 2 months).
Closing Tip
Just as a reminder, SBA charges the first trust lender a 0.5% fee on the
permanent first trust loan.
The fee is not due until the 504 loan closing,
but you should include it in your pricing and collect it at the time of the bank closing.
As you know, we must submit all appraisal and environmental reports to SBA for
clearance before we can close. SBA has made a shift in their policy and now requires
that all reports be dated within one year of submission to SBA, rather than within
one year of loan application. If you have been holding appraisals
or environmental reports until the project is complete, please send those in now!
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Business Finance Group Completes Successful SBA Audit |
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SBA has formed a department
to conduct regulatory audits of both
7(a) lenders and CDCs. CDC audits began in
December, 2006. Business Finance Group was audited and recently received it’s final
letter. Our final file exception score was 0.75%, and we were found to be essentially
in compliance on all corporate and governance matters. We thank our staff for their
attention to detail
and our first trust lending partners for helping us maintain proper documentation!
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