BIG NEWS about changes to SBA 504 Refi Program!
504 Temporary Debt Refinancing Program Update!
On October 12, 2011 the SBA issued revised regulations with three major updates to the SBA 504 Temporary Debt Refinance Program:
Financing Business Expenses - The SBA 504 Standalone Refinancing loan program can now use equity to finance eligible business expenses as part of the refinance project. The SBA defines business expenses as "salaries, rent, utilities, inventory or other obligations of the business, that were incurred but not paid prior to the date of application or that will become due for payment within 18 months of the date of application." This means if the existing debt to be refinanced is less than 90% loan to value, business expenses may be included up to 90% loan to value. For example: if a business with an existing $1 million loan on a $1.8 million building can identify up to $200,000 worth of eligible business expenses incurred or to be incurred in the next 18 months, the 504 Standalone Refinancing project may be $1.2 million, involving a bank loan of $600,000 and a 504 Standalone Refinancing loan of $600,000.
Third Party Loan Amount - Effective immediately, the third party lender loan amount may be equal to the new SBA 504 loan amount providing the SBA 504 share is no more than 40% loan to value and the total debt to be refinanced is no more than 90% loan to value. Previous guidelines required the third party loan to be 50% of the appraised value of the project. For example: previously, to refinance a $1 million conventional loan on a building that appraised for $1.8 million, the old rules would require the bank to finance 50% of the appraised value - $900,000), leaving a $100,000 504 Standalone Refinancing loan. New rules allow the third party lender to restructure the outstanding debt so that their new loan could be $500,000 with a 504 Standalone Refinance loan of $500,000.
Payment History – The payment history requirement of "current on all payments" now means that no payment was more than 30 days past due from either the original payment terms or modified payments terms (including deferments) if such modification was agreed to in writing by the borrower and the lender of the existing debt prior to October 12th, 2011. Previously, if a borrower was more than 30 days past due at any time for any reason in the previous 12 months, the borrower would be ineligible for the SBA 504 Standalone Refinancing program.
In all other aspects, the SBA 504 Standalone Refinancing program remains the same. The SBA 504 Temporary Debt Refinancing program will only be available through September 27, 2012!
For more information on SBA Loans - contact:
Geoff McGivern - Business Development Finance Corporation
3300 N. Central Ave. Ste. 600 Phoenix, AZ 85012
(602) 206-2317 or Visit BDFC's Website
Phill Tomlinson is a Commercial Real Estate Broker with Commercial Properties, Inc. in Scottsdale Arizona.
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