Refinancing Existing Debt

With recent legislation, SBA 504 loans may temporarily include a limited amount of debt refinancing through September of 2012. As this is a temporary program ending in 2012, a recent amendment now allows for the inclusion of debt that may be ballooning or maturing after 2012. The previous policy was to only include debt that may be ballooning or maturing before 2012. Based on the language in this recent legislation, to qualify for this new refinancing provision, the existing debt must:

• Have been incurred not less than two years prior to the date of the refinance application.
• Be a commercial loan and not subject to any Federal guarantee.
• Have been used to acquire fixed assets which would have been eligible under the regular 504 program and provided to the lender as collateral.
• Have been current for at least the past year before applying for refinancing.

The new financing may not be more than 90 percent of the value of the collateral securing the loan, which may be subject to additional borrower contributions if necessary to attain the correct loan to value ratio.

In addition to debt refinancing, the borrower may also use specified and itemized amounts to pay business expenses, but no part of the financing may be used for non-business purposes.

For more information on this program, please contact Ted Rowan.