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SBA 504 Refinancing Program
SBA has announced changes to the guidelines for the standalone SBA 504 Refinancing Program, which was originally approved as a part of the Small Business Jobs Act. This is a temporary program that allows the SBA 504 Loan to be used for refinancing some types of conventional loans, and the program is authorized through September 27, 2012. Several important parameters of these changes are summarized below:
Changes to Temporary 504 Refinancing Program
FINANCING BUSINESS EXPENSES
A Borrower may now use its equity to finance eligible business expenses as part of the Refinancing Project provided that the amount of cash funds available to pay business expenses is not more than 90 percent of the appraised value after paying off the existing debt. THIRD PARTY LENDER LOAN
The Third Party Lender Loan is no longer required to be at least 50% of the appraised value of the 504-eligible fixed assets. Now, as in the regular 504 program, the Third Party Lender Loan must be at least as much as the 504 Loan. QUALIFIED DEBT SUBSTANTIALLY ALL USE OF PROCEEDS If the eligible fixed asset was originally financed through a commercial loan that would have satisfied the substantially all standard of 85 percent and was subsequently refinanced one or more times with the current commercial loan being the most recent refinancing, the the current commercial loan will be deemed to satisfy the substantially all standard.PERCENTAGE OCCUPANCY The final regulations provide that as long as the Borrower can demonstrate that it now occupies at least 51% of the building as of the date of 504 loan application, the percentage occupancy requirements are met.CURRENT ON PAYMENTS The definition of current on all payments due for not less than one year has been amended to allow a Borrower to be deemed current as long as during the 12-month period prior to the date of 504 Loan application, no payment was more than 30 days past due under either the original payment terms or under modified payment terms (including deferments). Any modification of payment terms must have been agreed to in writing by the Borrower and lender prior to October 12, 2011 when the final regulations were published. SBA reserves the right to decide whether modified repayment terms would preclude refinancing.6-MONTH CLOSING PERIOD Temporary debt refinance 504 Loans must be disbursed within 6 months after Loan Approval unless an extension for good cause has been granted. The Sacramento Loan Processing Center has now been delegated the authority to approve extensions of the disbursement period up to an additional 3 months for good cause. |
