What this does and does not include
Payments here are straight amortisation of the principal at the rate you enter. SBA guaranty fees, CDC and debenture fees and closing costs are left out, because they are set by the SBA each year and vary with loan size and term. If they will be financed into the loan, the loan payment calculator takes them as a percentage and shows the effect on the effective APR.
Two loans in one: how a 504 payment works
A 504 is three pieces of money. A conventional lender provides roughly 50% of the project as a first mortgage, a Certified Development Company provides roughly 40% as a second lien, and the borrower injects the rest. The two loans carry separate rates and can carry separate terms, so the monthly cost is two payments, not one.
Only the CDC portion carries the long fixed rate. The bank's first mortgage is priced separately and may reset, so it is worth running the bank rate a point or two higher as well.
Variable 7(a) rates
Most SBA 7(a) loans are variable and reset against the prime rate, so a payment worked out at today's rate is a snapshot. Running the same loan at a higher rate shows whether the payment still works if rates rise.
Questions
- How long are SBA loan terms?
- A 7(a) loan runs up to 10 years for most purposes and up to 25 years when it finances real estate. The CDC portion of a 504 runs for 10, 20 or 25 years. The term on your offer is the one to use.
- Does this include the SBA guaranty fee?
- No. The fee depends on the loan's size, term and the fiscal year it is approved in, and this calculator does not hold that schedule. Ask the lender for the fee in dollars and add it with the loan payment calculator if it will be financed.
- Is the result what I will pay?
- It is the arithmetic for the numbers you enter. The rate, term, fees and structure are set by the lender and, for a 504, the CDC.