Fee Relief Extended Through February for 504 Loan Program

The elimination of most up-front 504 program fees will continue through February, thanks to a bill recently passed by Congress and quickly signed by President Obama.

The U.S. Department of Defense appropriations bill provides $125 million for the continued elimination of both the bank participation fee of 0.5% and the certified development company (CDC) processing fee of 1.5% until Feb. 28, 2010, according to the Small Business Administration (SBA). This will reduce upfront borrower costs by approximately $10,000 on a typical 504 loan.

Another bill, known as the Jobs Bill, contains an additional $354 million to extend the fee eliminations through Sept. 30, 2010. Congress is expected to take this up at the start of the New Year.

According to the SBA, it plans to re-start the fee offset process by Dec. 28. Loan applications from borrowers who chose to be placed in the SBA’s Recovery Loan Queue will be funded first, followed by new loan approvals beginning on or before Dec. 28, according to the SBA.

The current fee relief is authorized until this additional funding is exhausted or the end of the fiscal year, whichever comes first. As was the case in November, the SBA will transition into a queue system as the funds start to wind down.

The SBA estimates this additional funding will support $4.5 billion in small business lending nationwide. The last round of fee eliminations for the 504 program helped jumpstart more than $14 billion in small business lending and increased the SBA’s average weekly loan volume by more than 75% since February 2009, according to the SBA.

The fee eliminations aren’t the only possible good news for the 504 industry. Legislation is also in the works that would allow for the refinancing of short-term commercial real estate debt into long-term, fixed rate loans as well as increase the cap on 504 loans.

504 loan caps are currently set at $1.5 million ($2 million if a public policy is met) and $4 million, respectively. The proposed shift to $5 million for standard small business borrowers would support a total project of $12.5 million, and to $5.5 million for small manufacturers would support a total project of $13.75 million, according to the White House and the SBA.

FFCFC will continue to follow these developments closely and forward all updates as soon as details become available.

For more information about 504 loans in Florida, contact Florida First Capital by visiting www.ffcfc.com, emailing us at insider@ffcfc.com or calling 888.320.5504.