What is an "Effective Rate"?

Monthly SBA 504 interest rates are standardized nationally and do not vary based upon which Certified Development Company (CDC) you utilize.

Most CDC's advertise the Effective Rate as the most accurate depiction of the program's interest rate.  However, some CDC's will market the program's lower Note Rate which only includes the cost to repay the bonds and does not include on-going servicing fees.  While this may be an effective marketing tool, it underestimates the true cost of the loan to the borrower.

The Full-Term Effective Rate is widely considered the most accurate rate to advertise to SBA 504 borrowers, and it is the rate that Dakota BUSINESS Finance utilizes in marketing the SBA 504 program and underwriting new loans.

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