Program Benefits
Loan Structure

IDS Corporation
8280 College Parkway
Suite 204
Fort Myers, FL 33919

Phone (239) 652-5588
Fax (239) 652-9988

IDS Corporation: 504 Update
Serving Small Business Since 1996

Premiums & Rates: The Spread of Risks or the Risks to the Spread?

After a thoroughly pleasant five month declining trend, debenture rates ticked up in the May auction of last week. This is not surprising given the steady upward trend in the ten year treasury, a benchmark to which the 504 20 year debenture loosely correlates. The saving grace to this situation, from a borrower’s perspective, has been the continued downtrend in the spread of the debenture rate to the ten year treasury. Since hitting a high of 3.49% in December of 2009, the spread has declined to 1.25% in the May auction. The “spread”, is the premium paid to debenture holder for the perceived risk above holding a treasury debt issue. While the principal and interest are guaranteed to the debenture holder, the holder assumes risk in the form of payment interruption or repurchase, which leads to rate risk as funds must then be reinvested at uncertain rates.

But, the spread may be ripe for adjustment...or to phrase it differently: are investors being compensated for their risks? Moving CMBS product, of whatever stripe, in the present environment is no small task, which argues for a larger spread. (Hats off to the DCFC, Steve Van Order and the underwriters!) However, in the medium term, increasing defaults and repurchases may be the factor that drives an expansion of the spread, as investors re-evaluate the risk in the 504 debenture portfolio.

The lender’s challenge is help a borrower identify and plan for these risks. Perhaps having a partner who could explain their half of the equation might be useful? Please visit our website, www.idscorp.org and see how the LATS software and our Network of local CDC partner licenses can bring predictability and accountability to the 504 lending process.

Welcome to the Revolution.


News & Events

WEBExpress - SBA Hot Topics in Review
Wednesday, May 20
Read More

WEBExpress - Document Compliance With the 'No Credit Elsewhere' Mandate
Thursday, May 28
Read More

Regional Training - Atlanta, GA
June 1-4
Closing and Funding the SBA Loan and Understanding the SOP 50-10.
Read More

Regional Training
Seattle, WA
June 15-19
SBA Application Processing, Closing and Funding the SBA Loan, and Understanding the SOP 50-10.
Read More

Online Training
The Guarantee Purchase Process and Preserving the Guarantee
June 9 & 10
Read More

Online Training - SBA 1502 Reporting
June 16 & 18
Read More

Coleman Online Conference
May 12, 2009
Coleman Audio Conference: "How to Finance Goodwill Over $250,000 with SBA"
Read More

Coleman Online Conference
May 20, 2009
SBA's 2009 Lending Programs -- A Comprehensive Update
Read More

Coleman Online Training
Submitting Flawless SBA 7(a) Loan Packages
Read More

8280 College Parkway • Suite 204 • Fort Myers, Florida 33919
Phone: 239.652.5588 • Fax: 239.652.9988
Email: admin@idscorp.org • Website: www.idscorp.org

Copyright ©2019 Independent Development Services Corporation. All Rights Reserved