New Opportunities for Existing Small Businesses: SBA Brings Back 504 Refinancing Program

Ed JobAlternative Financing, Funding Options, Small Business Financing, Women Owned BusinessesLeave a Comment

Small businesses looking to refinance their business’s real estate will have another option to do so starting on June 24 if they qualify. The SBA is bringing back its 504 refinancing and loan program originally implemented as part of the 2010 Jobs Act, but this time as a permanent measure.

Large capital expenditures for small businesses are about to get some relief starting on June 24. For small businesses with high-cost loans for real estate, the SBA’s 504 refinancing program allows small business owners who already have real estate debt to refinance that debt into long-term, fixed-rate loans. This change can help entrepreneurs focus their capital and other resources into pushing their business forward. Originally part of the Small Business Jobs Act of 2010, the refinance program meant to aid small businesses in accessing capital when the commercial lending market was frozen. This temporary measure expired in 2012, but Congress agreed in December to bring 504 refinancing back as a permanent option for small businesses looking to lower the costs of their real estate debt.

So what can this measure mean for your small business? The SBA is authorized to approve up to $7.5 billion under the 504 debt refinancing program, with eligible small business owners able to borrow up to 90% of the value of the property, with 10% down, less than would typically be required for a commercial loan. During the first implementation of the SBA’s 504 financing program, 2,731 small business applied for a total of $2.5 billion in funding. SBA associate administrator for capital access, Ann Marie Mehlum, said, “It was a great little program, but because of the Jobs Act it was temporary. The whole point of the program is to help small businesses be in charge of their destiny and to own real estate where they can grow.”

However, as with any refinancing venture, additional capital is necessary to get the ball rolling and to make sure you have a skilled professional in your accounting and finance corner guiding you along the way. Additionally, the real estate market in larger cities continues to present numerous issues for small business owners as prices continue to climb.

The SBA 504 refinancing program can allow small businesses to work with their original real estate loans, and by having the SBA financing for a piece of the debt, banks will be more willing to do the refinancing and small businesses can get the financing done in a cheaper way than possible before. Linda Reilly, the SBA’s chief of the 504 loan program, said the SBA anticipates that the 504 refinancing volumes of roughly $2 billion a year. She continued, “That’s roughly in line with what we had with the Jobs Act. We’ve done polls internally, and we anticipate pretty good participation. There are some areas of the country where real estate values are coming back, and we might see an uptick in those areas first.”

If you feel like your small business could take advantage of the SBA’s 504 refinancing program, you will need to apply through a certified development company; the SBA keeps a list of the country’s 270 CDCs on its website.

If you have questions about how the SBA’s 504 can fit into your financial mix—or if you find you cannot qualify for the program—you can reach out to one of Wellen’s financing experts for an assessment.

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