The Small Business Administration (SBA) has announced that business owners with eligible commercial real estate (CRE) mortgages maturing after Dec. 31, 2012, will be able to secure long-term financing through its temporary 504 refinancing program as a result of a change that will be published in The Federal Register by April 6.
According to the SBA, the change in its program will lift the date limitation and will allow more small businesses to secure stable, long-term financing and avoid potential foreclosure on mortgages approved before and during the recession that were based on inflated real estate values. SBA's traditional 504 loan program is a long-term financing tool that is designed to encourage economic development within a community.
A 504 loan provides small businesses with long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization. Borrowers are able to refinance up to 90% of the current appraised property value or 100% of the outstanding mortgage, whichever is lower, plus eligible refinancing costs. The loan is only for CRE financing and cannot be applied to other business endeavors.
To be eligible for the temporary 504 refinancing program, a business must have been in operation for at least two years; the debt to be refinanced must be for owner-occupied real estate and have been incurred no less than two years prior to the date of application and the proceeds used for 504-eligible business expenses; and payments on that debt must be current for the last 12 months.
‘With the collapse of the real estate bubble, many small-business owners have found themselves unable to refinance as a result of inflated real estate values at the time they took out their mortgage,’ says SBA Administrator Karen Mills. ‘SBA's temporary 504 refinancing program was first made available to those small businesses with the most immediate need. Today's step opens this critical assistance to more small businesses, giving them the opportunity to restructure their debt and free up capital that will be essential to keeping their doors open and also their future ability to grow and create jobs.’
SOURCE: Small Business Administration
