504 REFINANCE PROGRAM

Current Interest Rates | 20-Year: 4.39% | 10-Year: 4.36% | Refi: 4.43%

5-Year Interest Rate History

504 REFINANCE PROGRAM

Improvements Effective November 17, 2016!

  • Loan-to-Value Limitation for cash out increased from 75% LTV to 85% LTV.
  • Appraisals allowed to be dated within one year of 504 loan approval instead of six months.

 

504 Refinance Program

Demand for the return of the 504 Debt Refinance Program has been high due to its initial overwhelming success before it expired in 2012. Now it’s back, and the timing couldn’t be better! The 504 Refinance Program helps strengthen banks by reducing their lending exposure, while also providing a lifeline to businesses with balloon payments coming due.

With the re-launch of the 504 Refinance Program, small business owners can use the long-term, fixed rate 504 Loan Program to refinance existing commercial mortgages. This is huge considering the current trends are pointing toward tighter credit standards and higher interest rates.

At a time when it’s becoming increasingly difficult to refinance commercial loans, the 504 Refinance Program is here to fill the gap by providing an affordable refinancing product that both lenders and the small business community can eagerly embrace!

 

Quick Qualifiers

If you answer “yes” to the following questions, the project will likely qualify for the 504 Refinance Program.

  • Is the loan at least two years old?
  • Is the property being refinanced at least 51% owner-occupied or long-term equipment?
  • Was the debt to be refinanced originally used for the purchase/improvement of fixed assets?
  • Has the business been current on the debt to be refinanced for the past 12 months?

 

 

3 Keys to the Refinance Program

  1. 90% Advance Rate – No Cash Out
  2. 85% Advance Rate – Cash Out
  3. Credit Quality – minimum 12 month history of no late (30+) payments

FAQ'S

Is the refinance program permanent?
Sort of. While this is not a “temporary program” as it was in 2012, there is a mandate in place stating the Debt Refinancing Program will only be in effect in years the 504 Loan Program is operating at a zero-subsidy.  FY16 is a zero-subsidy year.
What businesses qualify?
Businesses with a successful track record and growth potential can generally qualify for the 504 Loan Program if the business is for profit and averages less than $5 million in annual profits and $15 million in net worth. Qualifying projects must have originally involved the purchase, construction or improvement of fixed assets such as land and building, and/or purchase of heavy machinery or equipment.
Is cash-out refinance available?
Yes. Talk to a Growth Corp loan officer for project specific details.
What kind of interest rate can I expect?
The interest rate is fixed for 20 years much like the standard 504 Loan Program. However, the effective rate will be slightly higher than standard 504 loans due to higher servicing fees.

Loan Structure Scenarios

Example 1:  Refinancing a Conventional Loan

  • Borrower seeks to refinance an existing $1 million commercial real estate loan
  • The property appraises at $2 million
  • An acceptable loan structure could be:

Comments:

The new third-party loan must be equal to or greater than the SBA 504 debenture amount, at least $500,000 in this example

Example 2:  Refinancing Multiple Conventional Loans

  • Borrower seeks to refinance an existing $200,000 commercial mortgage plus, an $800,000 second mortgage borrowed five years ago for 504 eligible business purposes
  • Property appraises at $2 million
  • An acceptable loan structure could be:

Comments:

Both the original first mortgage and the existing second mortgage can be combined.  The new third-party loan must be equal to or greater than the SBA 504 debenture amount, at least $500,000 in this example.

Example 3:  Cash Out for Eligible Business Expenses

  • Borrower seeks to refinance $1 million in existing qualified commercial real estate debt, plus $400,000 borrowed three years ago for equipment and inventory, plus $100,000 to serve as next year’s salary for a new employee
  • Property appraises at $2 million
  • An acceptable loan structure could be:

Comments:

The Refinance Program can be used for both restructuring qualified debt and accessing equity for business operating expenses.  Because the LTV amount does not exceed 85% and business operating expenses do not exceed 25% of the appraised value, this request meets SBA Refinance Program guidelines.

Example 4:  Cash Out for Eligible Business Expenses

  • Borrower seeks to refinance $600,000 in existing qualified commercial real estate debt, plus $800,000 for unsecured loan obligations and business operating expenses
  • Property appraises at $2 million
  • An acceptable loan structure could be:

Comments:

The Refinance Program can be used for both restructuring qualified debt and accessing equity for business operating expenses.  While the total refinance request does not exceed 85% LTV, only $500,000 of the $800,000 requested can be included because the total amount for operating expenses cannot exceed 25% of the appraised value.

Example 5:  Cash Out for Eligible Business Expenses

  • Borrower seeks to refinance $200,000 in existing qualified commercial real estate debt, plus $1.3 million for business operating expenses, some of which will be incurred in the next six months
  • Property appraises at $2 million
  • An acceptable loan structure could be:

Comments:

The Refinance Program can be used for both restructuring qualified debt and accessing equity for business operating expenses.  While the total refinance request does not exceed 85% LTV, only $500,000 of the $1.3 million requested can be included because the total amount for operating expenses cannot exceed 25% of the appraised value.

 

Download:  504 Refinance Scenarios

Ready to launch a new project?

877-BEST 504

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