Recent legislation now allows SBA 504 loans to be used to refinance existing debt on any property that would have originally qualified for a traditional 504. With SBA 504 financing, small business owners can pay down existing commercial real estate or equipment/machinery debt with a equity injection that can be as little as 10%. SBA 504 refinance loans are long term – either 10 or 20 years – with low, fixed interest rates. Businesses can also use the equity they have in their property to pay eligible business expenses.
An SBA 504 loan is a partnership between Southland EDC, the Small Business Administration and a lender. Working with a lender, Southland can lend up to 40% of the appraised value of the property to be refinanced with a dollar cap of $5,000,000 depending on the type of debt. Southland can go as high as $5,500,000 of SBA 504 projects for eligible manufacturing loans and for loans made for projects that incorporated energy saving technologies for sustainable design. A lender must partner with Southland to provide between 40% – 50% of the financing, and the business owner ends up paying as little as 10% as their share of the refinancing loan. This may include equity in the property.
An eligible business must have been operating a for-profit business for at least two years. The business must be located in the U.S. that, with affiliates, has a tangible net worth of less than $15 million and profit after taxes of less than $5 million.
The borrower cannot have been more than 30 days past due during the past 12 months on the payments on the note being refinanced.
The business must occupy at least 51% of its property at the time of application for refinance. Business may not use an SBA 504 refinance loan to repay an existing government guaranteed loan.
|Refinance Project Example|
|Appraised value of the property||$2,000,000|
|Oustanding balance of debt||$1,500,000|
|90% Loan to value (LTV)||$1,800,000|
|Payoff of the outstanding balance||$1,500,000|
|Amount available for eligible expenses||$300,000|
This special program will end on September 27, 2012. For more information contact one of our experienced Loan Officers.