News from the Small Business Administration this week may have put smiles on many faces of small business owners.
The SBA eliminated date restriction for 504 refinance program. In other words, more businesses can refinance their commercial real estate mortgages.
The SBA had restricted this refinancing option to small businesses that faced balloon payments on their mortgages before Dec. 31, 2012. After April 6, however, businesses with balloon payments due after that date can refinance.
The change seems largely because of the tough economy, specifically how it affected real estate. This is good news for businesses that might be struggling to keep their doors open. The federal government recently stated the need to help businesses get off the ground through small business loans, and other programs as well.
“With the collapse of the real estate bubble, many small business owners have found themselves unable to refinance as a result of inflated real estate values at the time they took out their mortgage,” SBA Administrator Karen Mills said. “SBA’s temporary 504 refinancing program was first made available to those small businesses with the most immediate need. Today’s step opens this critical assistance to more small businesses, giving them the opportunity to restructure their debt and free up capital that will be essential to keeping their doors open and also their future ability to grow and create jobs.”
To be eligible for the temporary 504 refinancing program, businesses must be in operation for at least two years, the debt to be refinanced must be for owner-occupied real estate and have been incurred no less than two years prior to the date of application and the proceeds used for 504-eligible business expenses, and payments on that debt must be current for the last 12 months.
Borrowers can refinance up to 90 percent of the current appraised property value or 100 percent of the outstanding mortgage, whichever is lower, plus eligible refinancing costs.
For more information, read the press release from the SBA here.
What do you think about this change? Does it apply to you?