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SBA Launches New Refinancing Program 504 Commercial Mortgage Debt Refinancing Program

Small businesses facing maturity of commercial mortgages or balloon payments before December 31, 2012, may be able to refinance their mortgage debt with a 504 loan from the Small Business Administration (SBA) under a new, temporary program.

The new refinancing loan is structured like a traditional 504 loan, 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. A key feature of the new program is it doesn’t require an expansion of the business to qualify.

The SBA initially opened the program February 28th to businesses with immediate need due to impending balloon payments due before Dec. 31, 2012. It will evaluate the validity of the program and may open it to businesses with balloon payments due after that date or those that can demonstrate strong need in other ways.

Borrowers can refinance up to 90% of the current appraised property value or 100% of the outstanding mortgage, whichever is lower (inclusive of eligible refinancing costs). Loan proceeds may not be used for other business expenses and existing 504 projects and government-guaranteed loans are not eligible to be refinanced.

Congress has authorized the SBA to approve up to $15 billion in loans ($7.5 billion in both fiscal 2011 and 2012). Together with the first mortgage, this temporary program will provide up to $33.8 billion of total project financing. Additional fees charged to the borrower will cover the cost of the program and, as a result, no subsidy will be needed.

The program, authorized under the Small Business Jobs Act of 2010, will be in effect through September 27, 2012 and is expected to benefit as many as 20,000 businesses.

Kristen Tackett is Vice President and Business Development Officer at Florida First Capital Finance Corporation in Jacksonville. She can be reached at (904) 861-2270 or Kristen@ffcfc.com.