SBA Breaking News – March 29th, 2011
The SBA has just announced they are going to be expanding the pool of potential businesses eligible to refinance under the temporary SBA 504 refinance provision.
It was announced a few weeks ago that only those loans that were ballooning by 12/31/2012 would be eligible to refinance using the 504 program, but they have just released an update stating they will begin accepting applications on April 6th for all eligible refinance loans. (You no longer need to have a balloon coming due to be eligible).
Click here for more complete info on eligibility: SBA 504 Refinance.
Update January 2011:
SBA 504 Refinance Rules
The new SBA 504 Refinance Rules (that will not require a major business expansion) are expected to be released sometime in the next 30 days and that will be welcome news to frustrated lenders and small business owners hoping to take advantage of the program.
Many lenders have been gathering information for applications from small business clients they feel may qualify based on what the new 504 refinance rules will be.
Wait Almost Over
It’s been about 4.5 months since the legislation allowing 504 refinances (HR 5297) was passed and initially lenders had hoped to be able to offer the program by Jan 1st of this year. Some lenders have expressed frustration (and even a little anger) that it has taken so long for SBA to get the rules out, but keep in mind that we are not waiting on rules to be handed down from some small private company with a new offering. We are dealing with the (not so small) Small Business Administration and other government agencies like the Office of Management and Budget for final approval.
We also need to be mindful that this is a major change to the SBA 504 loan program and a significant opportunity for business owners and lenders because the 504 loan program is a construction and expansion program mostly geared towards job creation and retention – not a refinance program.
So, while it is unfortunate there won’t be a full 2 year window where a refinance will be allowable, there will still be a year and half for clients to take advantage of it.
Don’t Overlook the SBA 7a
And keep in mind, there is always the SBA 7a loan program as a back up and that program now has a maximum loan limit of $5 million and it allows for business debt consolidation and working capital – something we are not sure the 504 refinance will allow.
We will know what is possible in a few weeks, but if you have a pretty “vanilla” debt refinance situation and are relatively sure you have a 90% or less loan to value then you might want to consider getting your paperwork together in advance of the release of the new rules so you can be ready to apply.
The SBA and the Obama administration have proposed new higher loan limits for both SBA 7a and SBA 504 loans. Please see this related post for more up to date information:
The SBA will be holding a press conference today to discuss the details of the new SBA 504 Refinance program.
Refinancing has never been available with the 504 program before and this could be a big help to some business owners.
There are some caveats with the new rule including one that says the refinance must include an “expansion,” however, the SBA has decided (in their own words) to “broadly define” what constitutes an expansion. It is unclear how banks and lenders will interpret the new rule, but any improvement on the program is welcome.
The new guideline is also going to allow a limited amount of debt refinancing, but again we will need to see how it is going to read to see what is possible.
The 504 loan program has historically been overlooked, but it has been gaining in popularity because it is commercial financing that is actually available. It is an extremely attractive loan with many uses and it is available for most healthy businesses for financing in excess of $10 million.