[Federal Register Volume 83, Number 65 (Wednesday, April 4, 2018)]
[Notices]
[Page 14536]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06823]


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SMALL BUSINESS ADMINISTRATION


504 Loans and Debentures With 25 Year Maturity

AGENCY: U.S. Small Business Administration.

ACTION: Notice.

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SUMMARY: The U.S. Small Business Administration is making available a 
504 Loan, and the Debenture that funds it, with a 25 year maturity in 
addition to the 10 and 20 year 504 Loan and Debenture that are 
currently available in the 504 Loan Program.

FOR FURTHER INFORMATION CONTACT: John M. Wade, (202) 205-3647, 
[email protected].

SUPPLEMENTARY INFORMATION: The 504 Loan Program is an SBA financing 
program authorized under Title V of the Small Business Investment Act 
of 1958, 15 U.S.C. 695 et seq. The core mission of the 504 Loan Program 
is to provide long-term financing to small businesses for the purchase 
or improvement of land, buildings, and major equipment, in an effort to 
facilitate the creation or retention of jobs and local economic 
development. Under the 504 Loan Program, loans are made to small 
businesses by Certified Development Companies (``CDCs''), which are 
certified and regulated by SBA to promote economic development within 
their community. In general, a project in the 504 Loan Program (a ``504 
Project'') is financed with: A loan obtained from a private sector 
lender with a senior lien covering at least 50 percent of the project 
cost (the ``Third Party Loan''); a loan obtained from a CDC (the ``504 
Loan'') with a junior lien covering up to 40 percent of the total cost 
(backed by a 100 percent SBA-guaranteed debenture sold in private 
pooling transactions); and a contribution from the Borrower of at least 
10 percent equity.
    Pursuant to 13 CFR 120.933, ``From time to time, SBA will publish 
in the Federal Register the available maturities for a 504 loan and the 
Debenture that funds it.'' The available terms for the 504 Loan, and 
the Debenture that funds it (``504 Debenture''), have been 10 and 20 
years since 1986. These instruments have provided intermediate and 
long-term financing for 504 projects involving small business 
acquisition of long-term fixed assets, including real property, 
buildings, and major equipment and machinery. CDC industry members have 
emphasized the small business need for an affordable fixed rate 
instrument with a term-to-maturity more closely resembling other long 
term mortgages. SBA has decided, therefore, to make available a 504 
Debenture with a maturity of 25 years. By extending the payment cycle 
by 60 months, SBA expects that the new instrument will decrease the 
monthly payments for the small business borrower and will provide 
flexibility for small businesses to better manage critical operating 
capital, which becomes more important when small business cash flow is 
increasingly challenged by rising operating expenses and interest 
rates.
    Each month, SBA pools the 20-year 504 Debentures and issues 
certificates backed by such pools to investors in public offerings. In 
the case of the 10-year 504 Debentures, these offerings occur every 
other month. SBA guarantees the timely payment of principal and 
interest when due on the 504 Debentures and the timely distribution of 
that principal and interest to certificate holders, and such guarantee 
is backed by the full faith and credit of the United States. SBA will 
similarly guarantee certificates backed by the 25-year 504 Debentures 
in their own pool, which, depending on demand, SBA expects to offer for 
sale on a monthly basis.
    This new 25 year 504 Debenture will be made available for 504 
Projects that are approved on or after April 2, 2018. The term of a 504 
Debenture for any 504 Project approved prior to April 2, 2018 may not 
be extended to 25 years. In addition, the term of the Third Party Loan 
accompanying a 25-year 504 Loan must be at least 10 years.

    Authority: 15 U.S.C. 697; 13 CFR 120.933.

William M. Manger,
Associate Administrator, Office of Capital Access.
[FR Doc. 2018-06823 Filed 4-3-18; 8:45 am]
 BILLING CODE 8025-01-P