SBA 504 Refinance Program – Commercial Real Estate Loans

Although, I’ve written about this in February, I thought it might be a good time for reminder, that as of April 6th the SBA Small Business Administration will open its 504 refinancing option to businesses with commercial real estate balloon payments due after that date.

“With the collapse of the real estate bubble, many small business owners have found themselves unable to refinance as a result of inflated real estate values at the time they took out their mortgage,” SBA Administrator Karen Mills said.

The basic rules are:

  1. Refinance proceeds to be used for current eligible costs
  •         Owner occupied commercial real estate
  •         Machinery and equipment
  •         Closing cost associated with the project
  1. Loan being refinanced has been current for the past year with no payment(s) being deferred or past due for more than 30 days
  2. Debt must be 2 years or older prior to the date the application is received
  3. Small business must have been in business for two years or longer prior to submitting the application.
  4. In addition to a cash contribution, the borrower’s 10% contribution may be satisfied by its equity in the Eligible Fixed Asset(s) serving as collateral for the Refinancing Project or by the equity in any other fixed assets that are acceptable to SBA as collateral. (An independent appraisal of the fair market value of the project assets and any additional assets offered as additional collateral must be provided.)
  5. No refinancing of loans with an existing federal guarantee – 7(a), USDA, 504

More detail at the SBA link