SBA 504 Loan Refinancing Program Offers Small Businesses Working Capital

By Karen Axelton

Do you have an existing business loan you’d like to refinance? Changes to the SBA’s 504 loan program can help. As part of the Small Business Jobs Act of 2010, the 504 Loan Refinancing Program was put in place to let small businesses refinance loans and use equity to get working capital loans.

Here’s how it works: Borrowers can finance up to 90 percent of the appraised value of available collateral, which can include fixed assets such as commercial or residential property. This allows borrowers that have more than 10 percent equity to get additional working capital to pay for eligible business expenses.

The program is structured like SBA’s traditional 504 loan program, which means borrowers work with third-party lending institutions and SBA-approved Certified Development Companies (CDCs) to get financing, in a traditional 10 percent/50 percent/40 percent split.  However, instead of requiring the third party lender to contribute 50 percent of the project, now the third party lender simply has to contribute an amount equal to or greater than the SBA amount.

This is a temporary program intended to benefit small businesses that have loans maturing—in particular, commercial mortgage loans for properties whose value may have declined due to the recession. The goal is to help small companies lessen the amount of money they have to commit to paying mortgages and make more money available for ongoing business expenses, helping to keep businesses afloat and preserving jobs.

In order for your business to be eligible for the program, the debt must have been incurred at least two years prior to the date of your refinancing application. The program will end September 27, 2012 but loans do not have to mature before that date; in fact, the SBA has expanded the program to include loans maturing after December 31, 2012.

The SBA estimates that as many as 8,000 small businesses will take advantage of the refinancing program in the current fiscal year. For more details on the program, visit the SBA website and read FAQs here.

Image by Flicker user Woodley Wonderworks (Creative Commons)

This entry was posted on Tuesday, December 20th, 2011 at 6:00 am and is filed under Capital Access, Raising Capital, Small Business, small business, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed.


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