SBA Comparative Loan Analysis
7 (a) vs. Lender & 504
Commercial Real Estate Project Totaling $1,000,000
| 7 (a) | LENDER & 504 | |||
| 504 | N/A | $400,000 | 40% | |
| Lender (90%) | $900,000 | $500,000 | 50% | |
| Down Payment (10%) | $100,000 | $100,000 | 10% | |
| Total Project (100%) | $1,000,000 | $1,000,000 | 100% | |
| 7 (a) | LENDER & 504 | LENDER | 504 | |
| Loan Ammount | $900,000 | $900,000 | $500,000 | $400,000 |
| Interest Rate¹ | 7.00% | 5.95% | 7.00% | 4.61% |
| Years Amortized | 20 | 20 | 20 | 20 |
| 7(a) Guarantee Fee paid up front |
$20,250 | N/A | N/A | N/A |
| 7(a) Processing Fee² | $3,896 | N/A | N/A | N/A |
| 504 Lender Participation Fee | N/A | $2,500 | $2,500 | N/A |
| 504 Processing Fee included in 504 note |
N/A | $6,000 | N/A | $6,000 |
| 504 Funding Fee included in 504 note |
N/A | $1,000 | N/A | $1,000 |
| 504 Underwriter Fee included in 504 note |
N/A | $1,636 | N/A | $1,636 |
| TOTAL SBA FEES | $24,146 | $13,136 | ||
| Total Note Amount | $900,000 | $911,000 | $500,000 | $411,000³ |
| Monthly Payment | $6,978 | $6,501 | $3,876 | $2,624 |
| Effective Interest Rate | 7.00% | 5.95% | 7.00% | 4.61% |
| Total Principle & Interest | $1,678,616 | $1,560,223 | $930,359 | $629,864 |
| Cash Down Payment | $120,250 | $100,000 | ||
| Total Cash | $1,798,866 | $1,660,223 | ||
| $138,643 | 504 CASH SAVINGS | |||
Notes:
- Lenders do not have to be a licensed SBA lender to participate in the 504 program
- Lenders have no servicing requirements on the 504 loan
- Lenders do not have to remit monthly SBA fees on 504 as they do with 7(a)
- Lenders' rates typically adjust every 3 - 5 years
- The 504 rate is fixed for the 20 year term on the 504 portion of the loan
Footnotes:
¹ The 5.95% interest rate is a blended rate of the 504 loan and the Lender loan.
² The 7(a) processing fee is paid by the Lender via the SBA 1502 report monthly on each 7(a) loan. The amount is .494% of the interest on the SBA quarantined portion of the loan.
³ 504 fees are included in the note amount and rounded to the nearest $1,000. In this example the $6,000 + $1,000 + $1,636 = $8,636 is rounded to $9,000 and is included in the note. This takes the 504 portion of the loan from $400,000 to $409,000. The rounding difference of $364 will be refunded to the borrower when the 504 loan is booked.
