For a Limited Time, Small Businesses Can Refinance Existing Fixed Assets Under the 504 Loan Program.
NOTE: The temporary SBA 504 Debt Refinancing Program expired on Sept. 27, 2012. Your assistance is requested to help urge Congress to continue this program, which helped scores of small businesses escape maturing high-interest fixed asset mortgages and thus avoid potential foreclosures.
The National Association of Development Companies (NADCO), of which Florida First Capital is a member, is making a strong effort to get this program renewed. NADCO and Florida First Capital need your help.
If we are successful, the SBA could reinstate the program permanently under legislation currently being considered by Congress. Please help us by contacting your Congressional Members to support this valuable program for small businesses and your communities. (Click here for an online directory of Congress.)
The SBA 504 Debt Refinancing Program allows small businesses with eligible commercial real estate mortgages and other major fixed asset debt to take advantage of stable and long-term 504 financing and thus avoid potential foreclosure on mortgages approved before and during the recession that were based on inflated values.
Overview of 504 Debt Refinancing Program
- This is a temporary program authorized until Sept. 27, 2012.
- Borrowers can finance up to 90% of the current appraised property value, plus 504 eligible refinancing costs.
- 504 loan proceeds are to be used to refinance qualified debt with no money going toward expansion.
- Excess equity in the asset may be used for financing of eligible business expenses to support business operations for a period of 18 months (salaries, rent, utilities, inventory, etc.).
- At least 85% of the original loan was used to acquire, construct or improve fixed assets.
- The small business concern must have been in business for two years prior to submission of the refinance application.
- Debt must have been incurred not less than two years prior to the date the refinance application is received by the SBA.
- Loans being refinanced must have been current for the past year with no payment being deferred or past due for more than 30 days. If the loan is “own lender debt,” a full transcript history of the loan must be provided to evaluate risk.
- An independent appraisal of the fair market value of the project assets and any additional assets offered as additional collateral must be provided.
Loan Structure/Down Payment Schedule
- Total of first and second mortgages on refinance deals will be 90%; the structure will vary depending upon the transaction.
- In addition to a cash contribution, the borrower’s 10% contribution may be satisfied by its equity in the eligible fixed asset (the 504 project) serving as collateral for the refinancing project or by the equity in any other fixed assets that are acceptable to the SBA as collateral.
- Existing 504 projects and government guaranteed loans are not eligible.