Update: June 2016:
The refi program is officially back. Guidelines have been released with more to come shortly. Here is what is known so far:
· Special Use or Single purpose buildings like hotels and assisted living facilities ARE eligible up to 90% LTV even though they would typically require more equity to get SBA financing as long as all the debt to be refinanced consists of secured long-term fixed assets.
· The business must be at least 2 years old.
· The debt to be refinanced must be at least 2 years old
· The loan to be refinanced must be current during the last 12 months
· Real estate, long life heavy equipment and machinery can be financed at 90% LTV
· Cash out for operating expenses including debt consolidation is limited to 75% loan to value. (This hurts as the industry was hoping for 90% loan to value like the original version of the program offered, but this is understandable).
· Existing “government backed” loans are not eligible to be refinanced (i.e. the program cannot be used to refi an existing 504 loan, an SBA 7a loan or a USDA loan).
SBA will start accepting loan files from lenders on June 24.
Breaking News 12/18/2015 : Congress has just approved the return of the 504 Refinance Program
The 504 refi program had a very short, but successful life a few years ago and quite frankly not that many people in the SBA lending industry thought it would ever come back, but today it was written into law and it will be permanent.
This could be a HUGE deal for business owners needing to refinance their real estate, buildings and equipment.
It will likely be 4 to 6 months before the program is rolled out and we won’t know exactly what the rules will be, but hopefully they will be similar to what they were the last go round.
This post as well as our web page located here will be updated as information becomes available.
SBA Loan Down Payment - When Can It Be Borrowed?
You can borrow the down payment for an SBA loan if you have another source of income outside of the business that you are borrowing the money for AND if the payment on the borrowed money is something you can comfortably afford.
The Small Business Administration states the following in their “underwriting manual”:
If the Small Business Applicant can demonstrate repayment of this personal loan from sources other than the cash flow of the business, the cash injection may be considered equity. (Note: The salary of the business owner does not qualify.)
There are many good examples of how this could work. Probably the most common scenario is one in which a prospective borrower has home equity available that they can borrow against and a regular job with regular income to make the payments (or a spouse with a job and consistent income) AND the business being acquired or started is the type where the business owner does not need to be on site full time. (Home equity payments are usually very affordable).
A good example of this would be a self storage business, especially one where the customers can let themselves in. Other good examples would be businesses where the business owner has capable management - like a hotel.
100% Financing - An Alternative for Existing Businesses
Keep in mind that there is a 100% financing option with the SBA 7a loan for existing businesses buying real estate. It is not without it’s shortcomings, but it can be a very good solution for some businesses. Click here for more info.
If you have a question about your situation feel free to e-mail me at jking(at)greencommercialcapital(dot)com.