SBA 504 Blog

SBA Loan Requirements & Other Useful Commercial Loan Information

SBA 504 & 7a Loans, Green Commercial Loan Info & An Occasional Burst of Insight

SBA Loans

SBA 504 Refinance Loan Is Back!

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SBA 504 Refinance Loan is Back!
Update: June 2016:

The SBA 504 Refinance Loan 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.

Commercial Loan Refinance Up To 90% LTV

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Commercial Mortgage Refinance Now Available Through SBA

Business owners who occupy 51% or more of their commercial property are now eligible to refinance their commercial loans that are coming due with 90% financing through the SBA.

This is a temporary program available for approx 1.5 years (through Sept 2012) primarily designed to help profitable businesses who may no longer have enough equity to get conventional financing.

The first phase of the program will only be available to business owners whose loan is coming due prior to December 31, 2012, but the program is expected to be expanded in the coming months.

SBA Refinance Benefits:

  • Available up to 90% loan to value
  • No balloons or calls
  • Long term amortizations of 20 to 25 years
  • Low risk to lender because of Govt Guarantee
  • Below market fixed rates*

SBA Program, But Not Just for Small Businesses

Because of recent legislation, the SBA commercial mortgage refinance programs are open to mid-sized businesses and can now accommodate larger loans for larger businesses.

Loans can now be in excess of $12 million and businesses are now eligible as long as they have a tangible net worth of less than $15 million and after tax income of less than $5 million.

Not For Every Business

The SBA 504 refinance program has some caveats to it, but if you can meet them (and many will be able to) then you should consider it.

Cash Out for Business Debt Consolidation

The SBA also intends to open the program up to businesses who have balloons coming due after 12/31/2012 or to those who stand to benefit substantially from a refinance…AND they will likely allow some cash out to pay business debt, but those adjustments to the program likely won’t happen for a few months.

As an alternative, the SBA 7a program allows loans of up to $5 million and is available now for business debt consolidation as long as you can prove the debts are business-related.

* The SBA 504 program consists of a first and second mortgage and the second mortgage is a below market 20 year fixed rate.

Super-Sized SBA Loans: BACK UP!

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This post may be inappropriate for business owners under the age of 18 😉

SBA Loans Are Now Much BIGGER
SBA Loans Are Now Much BIGGER

Have you ever gone to a good comedy club and not laughed your self silly?

I can semi-vividly remember a guy I saw about 15 years ago at the Punchline here in Atlanta. He had some great bits including one about how the British were doomed to lose the Revolutionary War, because (DUH) they were marching through the forest in bright red uniforms loudly playing musical instruments.

Kind of like if you were deer hunting and a deer came up, tapped you on the shoulder and with pointed hoof said:  “Shoot Here.”

He also had a recurring bit about the size of a certain something that seemed inspired by Clevon Little’s immortal line from Blazing Saddles:

“Excuse me while I whip this out”

He would slip it in during various moments in his routine and get the audience to shout “HOW BIG IS IT?” To which he would start to undo his belt and reply “BACK UP!”

It was actually a great hook and he would work it in at just the right time.

If you don’t know the scene from Blazing Saddles…here it is:

http://www.youtube.com/watch?v=5PmnKOkt7fI

So what does this have to do with SBA loans?  I am actually still trying to figure that out myself because I just started typing and this is where I ended up :).

Actually, it has to do with the new “Super Sized” maximum SBA loan limits.

So just how BIG are they?  Well…BACK UP! 🙂

Okay, on a more serious note, the new loan sizes are significantly larger than before.  I sorta/kinda covered this in an earlier post, so maybe this is just my way of injecting a little comedy into an otherwise dull subject.

Here’s the scoop:

SBA 7a Loans – previously maxed out at $2 million, now $5 million (yup, that’s bigger)

SBA 504 Loans – “regular” 504 loans were previously maxed at $1.5 million and are now also $5 million (that’s bigger too).

SBA Green 504 Loans – these loans previously maxed out at $4 million and are now $5.5 million.

SBA 504 Loans for “small manufacturers” – these also previously maxed out at $4 million and are now $5.5 million.

Keep in mind that 504 loans are second mortgages provided by CDC’s (Certified Development Companies) and account for just 30 to 40% of the total amount financed which means maximum SBA 504 (combined) loan amount between the first and second mortgage are significantly higher than the $5.5 million 504 limit.

In addition to these changes, the standards for determining how large a business can be and still qualify have also been “SUPER SIZED” to include businesses with significantly more in assets and net income ($15 million and $5 million respectively).

So what have we learned from all of these changes?  Size matters with the SBA these days.

Small Business Jobs Bill? Or Lending Bill?

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HR 5297: Jobs Bill or SBA Lending Bill?

HR 5297 has been called both a “lending bill” and a “jobs bill” and it will be signed into law today by President Obama, which begs the question…which will it be?  A lending bill or a jobs bill?

The answer: both.

SBA Legislation Will Increase Lending and Jobs
SBA Legislation Will Increase Lending and Jobs

It will be more of a “lending” bill” at first and a “jobs” bill second.

The reason is this bill is likely to help far more business owners refinance than those looking to start a business and hire new employees.

Admittedly, my data is somewhat unscientific and mostly based on calls and e-mails from business owners looking restructure their current debt to something more manageable…but, unscientific as it maybe, it still gives me a good pulse on what is going on on Main Street.

The question now is…How tough is it going to be to get a loan?

Well, the first thing to realize is this bill is not a miracle cure. It is not going to suddenly make bad loans into good loans, but as I mentioned in an earlier post the changes should allow banks to step up and do loans they were not doing before because they did not have the capital – or in the case of a 7a loan – a 90% SBA guarantee.

This legislation provides a way for small (and mid-sized) businesses to increase their cash flow by allowing more of them to refinance their commercial debt which will eventually lead to more business and more jobs.

Reasons there will be more Refinances/Job Retention than Job Creation:

1) Banks are still risk averse (in a big way) so startups and construction will still be tough.

2) Thousands of  small businesses have commercial loans with balloons coming due and they will be looking to refinance.

3) Many of these same businesses no longer have the equity required to refinance conventionally and the SBA will (in many cases) allow 90% loan to value refinances…so HR 5297 could allow them to refinance out of a loan that is coming due and into a new longer term 20+ year SBA loan.

4) There are just not as many people looking to open new businesses now as there were a few years ago.

5) There are many existing businesses looking to consolidate debt and cut their payments.

6) The new larger loan amounts and new larger small business size limits will allow larger loans to be done and for larger businesses.

So will the Small Business “Jobs” Bill create jobs?

Yes, it definitely will, but it will take a while for the capital created by these loans to filter through the economy and create the amount of jobs being thrown around in the various estimates.

Bottom line: it will create a surge in SBA lending and it should be a nice shot in the arm for our economy.

SBA 7a Loans

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SBA 7a Loans

This blog is primarily about the SBA 504, but there is another SBA loan program that needs to be discussed – the SBA 7a loan.

At the moment, 7a loans are MUCH easier to qualify for than 504 loans and they are more flexible than the 504.

SBA 7a loans can be used for “any legitimate business purpose” including:

  • real estate purchase
  • refinance
  • working capital
  • business debt consolidation
  • equipment
  • renovation
  • inventory

AND they are available up to 85 or 90% loan to value for most businesses and even 100% loan to value for some businesses.

7a loans are currently limited to $2 million, but they may soon be available for loans as high as $5 million and unlike 504 loans, there is a healthy secondary market for 7a’s.  (The secondary market is where banks sell their loans which gives them the ability to recoup their capital and make more loans).

So if you have a healthy small or mid-sized business and you need a commercial loan to refinance your current loan, consolidate business debt, for working capital or another legitimate business purpose then you should take a look at the SBA 7a.