Small businesses facing maturity of commercial mortgages or balloon payments before Dec. 31, 2012, may be able to refinance their mortgage debt with a 504 loan from the SBA under a new, temporary program.
The new refinancing loan is structured like SBA's traditional 504, with borrowers committing at least 10% equity and working with third-party lending institutions and SBA-approved certified development companies in the standard 50% /40% split, according to the agency. A key feature of the new program is that it does not require an expansion of the business in order to qualify.
Borrowers will be able to refinance up to 90% of the current appraised property value or 100% of the outstanding mortgage, whichever is lower, plus eligible refinancing costs. Loan proceeds may not be used for other business expenses. Existing 504 projects and government-guaranteed loans are not eligible to be refinanced.
The SBA said it will begin accepting refinancing applications on Feb. 28. The program, authorized under the Small Business Jobs Act, will be in effect through Sept. 27, 2012.
Businesses with immediate need due to impending balloon payments before Dec. 31, 2012 will have first access. The SBA said it will revisit the program later and may open it to businesses with balloon payments due after that date or those that can demonstrate strong need in other ways.