SBA 504 Refinance Loan Program Going Away?

by John King on April 30, 2012

SBA 504 Refinance Program A Success, But…

The temporary SBA 504 refinance program has kind of suddenly become a big success (after a very sloooow start) and it has helped many small business owners refinance their current loans, consolidate debt and reduce their monthly expenses, but time could be running out for business owners to take advantage of this program because it is set to expire September 27th.

This is too bad, because it has provided a rare opportunity for business owners to get long term 90% loan to value financing on their buildings - half of it fixed for 20 years at historically low rates.

Industries that were hit hard by the recession like hospitality and manufacturing have benefited from the program.  In fact, SBA loans to refinance hotels were very hard to come by until this program started to take hold with lenders.

504 Refinance Deadline Looms

The program - originally part of the Small Business Jobs Act - was supposed to last 2 full years through September of this year, but much to everyone’s chagrin it does not look like it is going to be extended.

The reason for all of the “chagrinning” is that the program in it’s current form didn’t even hit the streets until 14 months after it was supposed to…which means it didn’t do a lot good for 14 of the 18 months it’s been available to date.

The delays in rolling out the program are immaterial at this point, but what is important is that deals are now getting done and the program has sparked a lot of lending and pumped life into some sectors of the commercial real estate market.

Financing of Business Expenses

One of the reasons the program has gained so much traction lately is that the SBA tweaked the program last Fall to allow “cash out” for legit business expenses including such things as business credit card debt, equipment purchases, building renovations, repairs and maintenance, salaries, rent, etc.  Unfortunately, the program is set to expire  just as word is getting out about all of the great things you can use the program for…and just when lenders are starting to get healthy.

So, if you own a building and you run your business out of it and you think you could benefit from refinancing, then you might want to take a fast (but thorough) look at the 504 refinance program before it dies an untimely death.

For more detailed info on the program guidelines, click here.

A Glimmer of Hope

3 Senators have just introduced a new bill - S.2364 - that would extend the refinance provision for another year.  Senators Olympia Snowe, Mary Landrieu, and Jeanne Shaheen have introduced the legislation in the hopes that the program could be extended.

Word on the street is that it is not likely, but it’s a new bill, so you never know…stay tuned.

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