A new mortgage refinancing program for commercial real estate is being offered by U.S. Small Business Administration to help refinance businesses. This temporary refinancing program implemented by SBA makes it possible for small business with maturing commercial real estate mortgages to refinance under the SBA 504 loan.
SBA is in the process of expanding the loan program to include facilities that mature or balloon after Dec. 31, 2012. Many small businesses have been facing difficulty in finding mortgage refinancing as a result of the real estate meltdown.
The 504 refinancing program was first given out to small businesses looking to refinance their real estate. Now the extension of this loan program will help businesses restructure debt and have access to capital that will help them to grow and create jobs. This program will remain in effect through Sept. 27, 2012.
Loan Eligibility Criteria:
- Businesses should be in operation for at-least two years.
- Only owner real estates are eligible for refinancing of debt.
- The proceeds must be for meeting expenses of 504 eligible businesses.
- Current on last past 12 months payments
On meeting these criteria, small businesses are eligible to refinance loans. But, typically, a 504 loan has three stated elements:
- A first mortgage secured with a senior lien from a private sector lender that covers 50 percent of project cost.
- A second mortgage secured with a junior lien from SBA Certified Development Company that is backed by 100% SBA-guaranteed debenture that covers 40 % of the cost.
- 10 % equity contribution from Small Business borrower.
The 504 program allows borrowers to refinance up-to 90% of the current appraised property value or even 100 % of outstanding mortgage.
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to