SBA 504 Refinance

Due to the revision of the SBA procedures (SOP) and more recently the Obama's stimulus package, much has changed with regards to SBA loans in general and for the popular SBA 504 loan.  Refinancing with an SBA 504 loan has up to now, not been an option.  It has been reserved for purchase transactions only.

Recent changes however have finally allowed for and provided specifics for refinancing existing debt with the 504 loan program.  The most important component for borrowers to know is that the loan has to be used for EXPANSION.  

SBA 504 Refinance - Expansion

It can not be used to to simply refinance existing debt.  The total loan amount has to increase.  The best example of an eligible deal, would be for a borrowers that needs to add square footage to their existing building.   So in essence a construction/"addition" loan.    (However, it is important to keep in mind that "expansion" has not been clearly defined by the SBA.) 

Why all the fuse anyway?  Long term fixed rates...  at high levels of financing that borrowers can not get from anywhere else, including conventional bank loans or from the SBA 7a loan.  For example, borrowers can get 20 year fixed rates on the SBA loan (CDC piece) and up to 10 year fixed rates on the conventional portion of the 504 loan.  And up to 90% loan to value...  In addition, due to the government involvement from the SBA, banks are actually FUNDING theses loans.  It's a much safer bet for the banks because of their reduced loan to value (at 50%) and the secondary market for 504 is still healthy. 

Stay tuned, we are following this closely and as soon as the SBA announces more details we will let all know. 

248 885 8797