Analyzing The Difference Between Old And New SBA 504 Debt Refinance Program

The SBA’s 504 Debt Refinancing Program is a boon for any small business owners who need to lower their monthly debt payments and access the equity in their real estate holdings. Under this program, available through 504 Capital Corporation, an SBA 504 loan provider in Virginia, North Carolina, and Maryland, you can apply for below-market, fixed interest rate refinancing with repayment terms up to 25 years for up to 90% of the appraised value of commercial real estate property.

Recently, revisions to the program were published in the Federal Register as an Interim Final Rule. These updated regulations significantly expand the scope of 504 loan debt refinancing programs to help small businesses with both recovery and growth. 504 debt refinancing offers two authorized options. First, if the project involves the expansion of the small business, any amount of existing indebtedness that does not exceed 50% of the project cost of the expansion may be refinanced and added to the project's total cost. Second, debt refinancing is also available for projects that do not involve expansion. The majority of the new revisions apply to this situation.


For 504 debt refinancing with expansion –

  • The amount of the existing indebtedness that may be refinanced has increased from no more than 50% to no more than 100% of the project costs of the expansion.
  • All applicants must be up to date on any payments due in the 12 months preceding the SBA application date.

For 504 debt refinancing without expansion, the following updates apply  –

  • Eliminates the condition that refinancing is only an option when the 504 loan is at zero subsidy.
  • Eliminates the cap that restricts Certified Development Companies (CDCs) from processing new refinance loans over 50% of the prior year dollar volume.
  • Allows Premier Certified Lenders Program (PCLP) CDCs to use their delegated authority to approve 504 debt refinance without expansion applications. This is not an option if:
    • the debt being refinanced is part of the CDC’s existing debt.
    • the CDC is requesting a waiver of the requirement that 504 eligible fixed assets collateralizing any debt to be refinanced also collateralize the 504 loan
  • Reinstates an alternate job retention standard. This means that now, all existing jobs measured on a full-time equivalent (FTE) basis can be counted as jobs retained by the refinancing project.
If the project does not meet the job creation/retention criteria, the CDC may continue to use all available policy goals.
  • Qualified debt has now been reduced from 2 years to at least 6 months before the SBA application date may be eligible for refinancing.
  • Removes language allowing a loan to be eligible for 504 debt refinancing if that original loan had already been refinanced within 2 years of application date.
  • 504 loans can now be used to refinance existing federally guaranteed loans, including existing 7(a) and 504 loans. However, the refinancing of any federally-guaranteed debt must provide a “substantial benefit” to the borrower, i.e., a minimum 10% savings on the new installment amount attributable to the debt being refinanced. This definition also applies to the 504 debt refinance with expansion program.
  • Eliminates the requirement that the borrower must be current on all payments due for not less than 1 year before the SBA application date.
Please note that 504 Debt Refinancing Program loans are subject to all applicable SBA 504 Loan Program requirements.

Why Choose 504 Capital Corporation?

504 Capital Corporation is a certified SBA CDC providing 504 loan assistance in Virginia, North Carolina, and Maryland. We know your success can often depend on having access to affordable loans. As a preferred SBA 504 lender, we’re proud to help make a difference in the lives of small business owners and their employees.  As 504 loan experts, we can assist you with refinancing your debt and serve as a trusted advisor every step of the way. Contact us today so we can get started on achieving your business’ full potential.

Comments

Post a Comment

Popular posts from this blog

Everything You Need To Know About Construction Loans

Image
Construction projects are exciting, but also often require a significant investment of time and money. Fortunately, there are financing options available that can help you bring your project to life. One such option is the SBA 504 Construction Loan , which offers a variety of benefits for qualified borrowers. In this article, we'll take a closer look at SBA 504 construction loans in Maryland , including how they work, who qualifies, and the benefits of choosing this type of financing for your construction project. What Is An SBA 504 Construction Loan? An SBA 504 Construction Loan is a type of loan that is specifically designed to help small business owners finance the construction or renovation of commercial properties. These loans are made in partnership with private lenders and the Small Business Administration (SBA). In general, SBA 504 loans are structured to allow borrowers to obtain up to 90% of the total project costs, which can be used for a wide range of expenses includi...
Read more

FinTech Solutions for SBA 504 Small Business Financing

Image
S mall businesses often face challenges when it comes to securing financing for growth and expansion. Traditional financing methods can be cumbersome, time-consuming, and may not cater to the specific needs of these enterprises. In recent years, the landscape of small business financing has witnessed a transformative shift, thanks to the emergence of FinTech solutions. The Small Business Administration's (SBA) 504 loan program stands out as a crucial tool for businesses seeking to invest in commercial real estate. These loans, guaranteed by the SBA, provide a lifeline to enterprises looking to expand their physical presence. In this blog, we will explore the challenges associated with traditional financing, delve into the rise of FinTech in small business financing, and highlight how FinTech solutions are revolutionizing the SBA 504 financing landscape. Challenges in Traditional Financing Traditional financing methods often involve a complex web of paperwork, lengthy approval proc...
Read more

5 Ways To Get A Small Business Loan

So, you want to start a business? You have an idea for the perfect venture and are ready to take the plunge and invest in your future. Ambition is certainly an important piece of the puzzle, but now you need to figure out what’s next. To be successful, most potential business owners will need to secure a small business loan to help them with things like start-up costs, construction, or mortgage payments. Small Business Loans in A Few Easy Steps Ready to get started? Here are 5 ways to get a small business loan. 1. Research the type of small business loan you need If you are a new small business you will need a different type of financing than an established company interested in having additional money available for expansion.   Start-up companies can benefit from Small Business Administration (SBA) loans that are more forgiving when it comes to qualifications. Loans like the SBA 504 and 7(a) loans require less money down and have attractive repayment terms, including low, fixed-in...
Read more