SBA has made favorable changes to the SBA 504 Refinance Program!
Eligibility – New Business Definition
The borrower must have been in operation for 2 years as of the application date evidenced by financial statements submitted with the application. Any ownership changes during this 2 year period, SBA was ruling as a new business and automatically ineligible.
Rule Change: If there has been a change of ownership in the 2 years prior to application – SBA is stating it’s a new business and ineligible only if it’s a change in ownership that would have resulted in new, unproven ownership/management.
Cash Out / Business Operating Expenses Loan-to-Value 75% to 85%
For any project that includes cash out / financing of “Business Operating Expenses”, a maximum 75% loan to value of the refinancing project applied.
Rule Change: SBA has increased the maximum loan-to-value of the refinancing project to 85% for a project including cash out / financing of “Business Operating Expenses”.
The cash out portion of the refinance project stays the same – cannot exceed 25% of the value of the eligible fixed asset securing the Qualified Debt.
SBA was requiring appraisals to be dated within 6 months of application.
Rule Change: SBA now requires appraisals must be dated no later than 1 year prior the application approval.
We’ve seen the 504 Refi Program assist in refinancing contract for deeds and also utilizing the cash out capability to free up working capital to be used for many different things.
The 504 Refi Program can also help lenders with lending limit concerns and concentrations in particular industries.
These are favorable rule changes just in time for year-end renewals. Keep in mind the 504 Refi Program can assist in attracting new clients with below market, long term, fixed rates!
If you’d like to learn further details or schedule an individualized on-site training, give your MBFC Loan Officer a call.