The 504 CDC debenture rate is set monthly by SBA. The debenture funds at a long-term fixed rate (20-year and 25-year terms), priced off the 10-year Treasury plus a spread for SBA guarantee fee , central servicing agent fee, and CDC servicing fee. Rate locks at debenture funding, not at term-sheet signing.
504 debenture rate-setting and timing
Monthly debenture funding: SBA pools 504 debentures into monthly bond issuances. Each month, qualified deals close their bank first mortgage, then the CDC debenture funds in the next monthly debenture pool.
Rate composition: debenture rate = 10-year or 20-year Treasury at debenture-funding date + spread covering (a) SBA guarantee fee, (b) central servicing agent fee, (c) CDC servicing fee, (d) bond underwriting and issuance costs. The all-in rate is published monthly and is sub-conventional because of the SBA guarantee.
Rate lock timing: the rate is not locked at term-sheet signing or at bank closing. It locks when the debenture funds in the monthly pool. Sponsors face Treasury rate risk between bank closing and debenture funding (typically 30-60 days).
Bridge financing during pre-funding: between bank closing and debenture funding, the borrower has only the bank first mortgage in place. The bank typically extends an interim 'bridge' for the 40% debenture portion that gets paid off when the debenture funds.
Term selection: 25-year debenture is standard for real estate (introduced 2018). 20-year is standard for equipment-only 504 deals. Some lenders still write 10-year debentures for special-purpose or distressed deals.
Pricing transparency: SBA publishes the monthly debenture rate publicly. The bank first-mortgage rate is negotiated separately with the bank; the combined effective cost (blended rate across bank + debenture) is what the sponsor compares to conventional alternatives.
Sources
- 504 Loan Program · U.S. Small Business Administration · current
- SOP 50 10: Lender and Development Company Loan Programs · U.S. Small Business Administration · 2024