The 504 Report - July 2008

Current Rates
July Bond Sale Rate: 6.758% (20 year fixed rate)
	While treasuries dropped slightly, spreads widened causing a slight increase in the 504 rate for July. Our bond strategist believes there are signs of improvement (although it’s too early to considered a turnaround) in the credit markets with sales of investment corporate debt issuance on the increase plus several sales of Commercial Backed Mortgage Securities have occurred. In spite of the turmoil in the credit markets, the issues with Fannie Mae and Freddie Mac, and the IndyMac Bank takeover, our bond sale process continues to remain solid. The SBA full faith and credit guarantee coupled with a greatly expanded buyer base leads to oversubscribed monthly sales, albeit at higher spreads than we have historically seen.

July 2008

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Increased 504 Size Standards

To be eligible for 504 financing, a business must be considered “small”. Beginning August 18, 2008, a business will be considered small if it has a net worth of less than $8.5 million and after-tax income of less than $3 million on average for each of the last two years.

504 SOP 50-10(5) Training

Business Finance Group will offer several training opportunities in our offices on the new SOP which will be effective August 1, 2008. The training sessions will be held at our headquarters on August 6th, August 20th, and September 10th. Click here to view the flyer for these training sessions and for RSVP information.

We will also schedule several training opportunities in Maryland, the District of Columbia, and other areas of Virginia. Additionally, our staff would be pleased to come to your bank to provide training.

Click here to view the updated Appraisal and Environmental requirements.

Click here to view the updated Terms Sheet/Commitment Letter requirements.

NAGGL is offering a full day general SOP training on July 31st in Laurel, MD taught by NAGGL instructors. If you are interested in attending this training, click here for more information. It will principally cover the SBA 7(a) program.

New SOPs – Borrower’s Equity

We have been anticipating that SBA would make further revisions to provisions in the new SOP regarding the customer’s equity injection, and we are pleased to announce that a Notice will be forthcoming from SBA putting those new provisions on hold. For those of you who are avid readers of SBA’s SOP, you will have noticed that SBA had placed significant new restrictions on borrowed equity. For the next nine months, the old SOP provisions will be retained while SBA looks at loan data to see if borrowed equity has any impact on defaults and losses.

New SOP - Closing Costs

Historically, we have been allowed to include $2,900.00 in the debenture pricing (i.e., costs financed as part of the 504 loan) for legal fees and related out-of-pocket costs. With the new SOP, SBA has reduced the amount to $2,500.00 which will slightly increase our borrower’s out of pocket costs for the 504 closing.