Small businesses facing maturity of commercial mortgages or balloon payments before Dec. 31, 2012, may be able to refinance their mortgage debt with a 504 loan from the U.S. Small Business Administration (SBA) under a new temporary program.
The new refinancing loan is structured like SBA's traditional 504, with borrowers committing at least 10% equity and working with third-party lending institutions and SBA-approved certified development companies in the standard 50/40 split. A key feature of the new program is that it does not require an expansion of the business in order to qualify.
The SBA will begin accepting refinancing applications Feb. 28. The program, authorized under the Small Business Jobs Act, will be in effect through Sept. 27, 2012.
"The economic downturn of recent years and the declining value of real estate have had a significant, negative impact on many small businesses with mortgages maturing within the next few years," says SBA Administrator Karen Mills. "As a result, even small businesses that are performing well and making their payments on time could face foreclosure because of the difficulties they face in refinancing and restructuring their mortgage debt.’
The SBA initially will open the program to businesses with immediate need due to impending balloon payments before Dec. 31, 2012. SBA will revisit the program later and may open it to businesses with balloon payments due after that date or ‘those that can demonstrate strong need in other ways.’
"We are making this initial restriction to make sure our funding goes first to small businesses with the most need," explains Steve Smits, the SBA's associate administrator of capital access.
Borrowers will be 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.
Congress authorized the SBA to approve up to $15 billion in loans under this program over fiscal years 2011 and 2012.
SOURCE: SBA
