SBA 504 Refinancing Maturity Date Eliminated

Today, the SBA eliminated the maturity date restrictions on the existing debt that is being refinanced with the SBA 504 Loan Program.

In February, SBA implemented a temporary refinancing program enacted under the Small Business Jobs Act of 2010, allowing the SBA 504 Loan Program to refinance commercial real estate mortgages and equipment loans maturing before Dec. 31, 2012. The SBA change will lift the date limitation.

SBA 504 Refinance Guidelines
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.

The refinancing loan is structured like SBA’s traditional 504 loan. Typically, a 504 project includes three elements: a loan (or first mortgage) secured with a senior lien from a private-sector lender covering 50 percent of the project cost, a second mortgage secured with a junior lien from an SBA Certified Development Company (MCDC) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business borrower.

Borrowers are able to refinance up to 90 percent of the current appraised property value or 100 percent of the outstanding mortgage, whichever is lower, plus eligible refinancing costs. Existing 504 projects and government-guaranteed loans are not eligible to be refinanced.

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