| 7a Versus 504 |
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Overview
Among advantages to borrowers, there are significant savings as shown in the table below.
The following table is based upon a hypothetical $1 million project where 90% financing is provided under the 504 program and the 7(a) program. It assumes in each case that the bank (or non-bank lender) is making each of the 504 first mortgage loan and the 20- and 25-year 7(a) loans at Prime + 2%, and that interest rates remain constant at levels prevailing in early February 2001, when the prime rate was 8.5% and the effective rate on 20-year SBA 504 second mortgage loans funded that month was 8.4%.
| |
SBA 504 |
SBA 7(a)
20-year loan |
SBA 7(a)
25-year loan |
Financing provided
(including fees) |
1st Mortgage Lender
$507,500.00
504 2nd morgage
412,000.00 |
$924,000.00 |
$924,000.00 |
| Guaranty fees and other origination fees |
1st Mortgage "points"
$7,500.00
SBA/CLP fees
11,075.00
Total $18,575.00 |
$23,728.75 |
$23,728.75 |
| Average monthly payment |
1st Mortgage
$5,066.78
504 2nd mortgage
3,468.15
Total $8,534.93 |
$9,225.03 |
$8,724.24 |
| Total payments to maturity |
1st Mortgage
$1,216,026,.70
504 2 nd mortagae
738,608.85
Total $1,954,635.55 |
$2,214,007.24 |
$2,617,271.69 | Savings, SBA 504 vs. 20-year 7(a): $259,371.68
Savings, SBA 504 vs. 25-year 7(a): $662,636.16
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