SBA 504 Debt Refinancing

All Questions must be answered “Yes” to qualify for the SBA Debt Refinancing program.

Was the debt to be refinanced incurred more than two (2) years ago?
Has the business been in operation for at least two years?
Has the loan been current for the past year with no payments having been deferred or over 30 days past due?
If the Company is under Note modification or written repayment plan with the bank, is that modification/plan dated prior to October 12, 2011 and all payments received within 30 days of that repayment plan?
Was at least 85% of the debt being refinanced used for 504 eligible purposes (i.e. commercial real estate and equipment)?
Does the small business in question employ one FTE (full-time equivalent) for every $65,000 of SBA financing that is being applied for (or meet a public policy goal – BLP can assist in identifying a qualifying goal)?
Does the business currently occupy at least 51% of the real estate being refinanced?

The amount of total financing cannot exceed 90% of the fair market value of the fixed assets securing the loan, or the outstanding principal balance of the debt being refinanced, whichever is lower. Additional collateral can be pledged to supplement shortfall on project collateral.
If there is equity in the collateral used to secure the debt, Borrower can take cash out to use for business purposes, including: 1) paying down lines of credit; 2) expenses incurred prior to loan approval that are unpaid; and 3) expenses planned for the next 18 months (i.e. salaries, utilities and inventory).
Participating Bank loan amount must be at least the same as the SBA 504 loan amount.
Borrower contribution must be at least 10% of the appraised value of the collateral securing the loan (can include non-business assets).
The borrower’s contribution could be satisfied through its equity in the collateral being offered to the SBA.
Collateral must be appraised prior to closing (within 6 months).

No refinancing of existing SBA 504 projects, SBA 7(a) loans, USDA loans, or any other loans with a federal guarantee.
No refinancing where the creditor is in a position to sustain a loss and refinancing would cause a shift to SBA of all or a portion of that potential loss.
The program is strictly for debt refinancing and cannot involve an expansion of the small business: no acquisition, construction or improvement of land, buildings or equipment.
Refinance loans must be approved by 9/27/12.
Debt being refinanced may consist of one or more commercial loans.

The Business Lending Partners staff continues to review the regulations in detail in order to address your questions.

If you would like to discuss your refinancing project please contact:

Carolyn Engel

(262) 898-7420

Brian Gottschalk

(262) 898-7434