Update: March 2013: The cash out refinance program mentioned below was eventually approved, but business owners only had 14 months to take advantage of it before it expired. A new bill – The CREED Act – has been put forth that would bring back the program for another 5 years. Click here for more info.
Update: 10/23/09: A new bill (H.R. 3854) has been put forth that would raise the SBA 7a loan limit to $5 million which would go a long way towards helping small and mid-sized businesses with a refinance of either a business loan or a commercial real estate loan.
Unlike the 504 program, the 7a program is typically a variable rate, but it can be used for “any legitimate business purpose,” so there is a lot of good a larger loan amount could do.
It is probably unlikely at this point that the bill mentioned below will have a chance.
House Resolution 2527 – The Small Business Assistance in Debt (AID) Act– is a bill put forth by Congresswoman Betsy Markey from Colorado.
There hasn’t been much publicity about it yet, but it is bill that if enacted into law would allow most American businesses to temporarily use the SBA 504 program to tap the equity in their commercial property for needs such as working capital.
In essence, it would be a “commercial cash out refinance loan” backed by the SBA.
Technically, it should probably be called the “American Business Assistance in Debt Act” since the maximum SBA 504 project financing can go as high $12 or even $20 million so these loans really aren’t just for small businesses anymore.
If instituted properly it could be a HUGE help to businesses and our country as it would allow many business owners to refinance their current loans to better rates and terms and/or access capital that is tied up in their properties.
There would be numerous benefits provided by this legislation, not the least of which is that it would allow many business owners who have ballon payments coming due on their current loans to refinance into more attractive terms.
Jean Wojtowicz, the head of NADCO (the National Association of Certified Development Companies) recently testified before the US House of Representitive’s Committee on Small Business about the need for just such a program, so hopefully the bill or some similar legislation will get some traction.
(Rep. Markey currently has 6 co-sponsors for the bill).