Tag: Commercial

Lock in low rates with the Assumable Rate Conversion (ARC) loan program

What if you could lock in today’s rates for as long as 20 years? 

ARC LendingIf you own, want to purchase, or want to refinance a commercial building, you don’t have to deal with market rate fluctuations! With interest rates slowly beginning to come off their lows following the onset of COVID-19, now is a great time to lock in a long-term fixed interest rate to hedge against future rate increases. While traditional commercial real estate loans only allow for a 5-year fixed rate, through our long-term fixed rate program, we can potentially lock in your interest rate for up to 20 years!

This program is available for owner and non-owner occupied properties and a wide range of property types, including office, industrial, retail, medical, hospitality, and multi-family, among others. There are many additional perks to the program, as well.

Locking in your rate and avoiding rate changes allows you to maximize your return on investment. If you decide to sell, this product is assumable, meaning it can transfer to the new owner (pending credit approval), so they can keep the rate you locked in. This could be a huge upside to a buyer looking at increased rates in the future and could even make your property worth more because of this option. Additionally, this product is transferable; if you decide to sell, you have the option of simply transferring the loan balance to a new property you already own or plan to acquire.

Another benefit is the prepayment premium. If interest rates rise and you decide to pay the loan off, you would actually receive a prepayment premium. On the flip side, if interest rates were to decrease, you could be subject to a prepayment penalty. While this is a risk, we feel given today’s market conditions and historically low rates, this risk is minimal.

For further information on conditions, terms, and loan types, please contact your Northwest Bank commercial loan officer. Corey or Joe would be happy to talk to you about locking in your low fixed rate today! 

Joe Donahue

Joe Donahue

Vice President ,
Commercial Loan Officer

Corey Martin

Corey Martin

Vice President ,
Commercial Loan Officer

How small business owners can benefit from the SBA 504 loan program

Are you a small business owner looking to purchase or construct your own building? 

SBA 504 LoansMaybe you have considered the possibility of purchasing or constructing but are hesitant due to the traditional down payment requirements, interest rate risk, or general uncertainty in the economy. If so, the SBA 504 loan program could be the perfect solution.

Through the SBA 504 loan program, you can acquire your new facility with as little as 10% down, and lock in a low, fixed interest rate for up to 25 years on up to 40% of your project costs. While these features alone make this program a very attractive option, due to provisions included in the Economic Aid Act, this program is now more beneficial than ever. For new SBA 504 loans approved between 2/1/2021 and 9/30/2021, the borrower will be eligible to receive six months of payment subsidies up to $9,000 per month, and the elimination of some fees that can generally account for up to 2% of the total loan amount. With these two temporary measures, this can result in thousands of dollars in savings for the borrower!

General Program Overview

This SBA loan program is meant to assist small business owners with the purchase, construction or refinance of owner-occupied real estate, and in some cases, the purchase of equipment. The general loan structure includes the bank providing financing equivalent to 50% of the project costs, with the SBA providing financing of up to 40% (through a certified development company “CDC”), and the borrower contributing the remaining 10% of equity. In some situations, such as a special use property or new business, the borrower equity requirement is 15%, or 20% in the case of a special use property and new business. In these situations the SBA/CDC’s funding percentage would change (i.e. 50/35/15 or 50/30/20), as the bank is always at 50% of the project costs. However, the 50/40/10 split is most common.

Key Benefits of the SBA 504 Loan Plan

One benefit of the SBA 504 program is that the business’ down payment is as little as 10%, compared to a typical down payment requirement of 20-25% on conventional CRE loans.

Additionally, the SBA/CDC portion of the loan includes a fixed interest rate for the life of the loan, which can be up to 25 years. The average 20 and 25 year fixed rates on the SBA/CDC portion are much more favorable than typical CRE loan rates. For current loan rates, contact our commercial lending team.

With recent economic relief bills, the program is even more attractive than ever right now with the recently approved payment subsidies and fee eliminations on new loans approved between 2/1/21 – 9/30/21. Below are some additional details on these savings options.

6 Months of Payment Subsidies

New borrowers approved 2/1/21 – 9/30/21 will receive six months of payment subsidies (principal, interest and fees), capped at $9,000 per month, beginning with the first payment due after the loan has been funded by a debenture guaranteed by SBA and is in regular servicing status.

Fee Elimination

New borrowers approved 2/1/21 – 9/30/21 will also be eligible for the temporary elimination of the following fees:

  • 0.5% Third Party Lender Participation fee, and
  • 1.5% CDC Processing Fee

Combined, these two measures will result in significant savings for borrowers looking to buy, build, or refinance.

If you have questions about the SBA 504 loan program, one of our loan officers would love to have a conversation with you to discuss your options. Please contact Joe Donahue or Corey Martin to learn more about this great opportunity.

Joe Donahue

Joe Donahue

Vice President ,
Commercial Loan Officer

Corey Martin

Corey Martin

Vice President ,
Commercial Loan Officer