SBA 504 Refinance

BASIC REQUIREMENTS FOR 504 REFINANCE:

  • Applicant (OC) has been in operation for more than 2 years, supported by financial statements
  • Debt must be current for a minimum of 1 year
  • Debt being refinanced is “Qualified Debt”
    • Commercial loans (non-government debt)
    • Debt has to be 2 years old prior to the date of application
    • The debt refinance must be for the benefit and advantageous to the business
    • Substantially all (85% or more) of the proceeds of which must have been used for 504 eligible purposes to acquire, construct or improve long-term fixed assets, such as real estate and equipment
    • Financing of fees such as; prepayment penalties, appraisal costs and other professional soft costs are eligible (if supported by appraisal)
  • 10% contribution may be satisfied by equity in eligible fixed asset(s) or by the equity in any other fixed asset(s) that are acceptable to SBA as collateral for refinancing the project or additional cash
  • Appraisal must substantiate the project and the appreciated value will be counted toward the equity requirement
  • Some “Business Operating Expenses” are eligible with appropriate documentation (e.g. copies of utility bills, payroll receipts cancelled checks evidencing rent payments, business credit card bills, minor renovations)
  • Loan-to-Value Limitations:
    • Max 90% LTV on Projects refinancing only Qualified Debt or Other Secured Debt
      • If more the borrower must provide additional cash or other fixed collateral so as not to exceed 90% LTV
    • Projects that include the financing of “Business Operating Expenses” a maximum LTV of 85% applies. Business Operating Expenses can be up to 25% of appraised value.
  • Third Party Lender Requirements
    • Must be equal to or greater than the 504 Net Debenture Proceeds
  • Job Creation/Retention Goals Apply
  • Job Creation requirements match the regular 504 loan program.

SPECIAL NOTES:

  • Occupancy of 51% or more required
  • When the fixed asset serving as collateral is a limited or special purpose property, Borrower will NOT be required to increase its contribution to 15% (as would be required in a regular 504 Project)
  • The following are NOT eligible:
    • A new business (as defined by SBA) or acquiring a new business
  • Acquiring a new property
  • Financing a change of ownership with the buyout or buy down of one or more co-owners
  • Paying off or paying down debt owed to owners
  • Paying off or paying down an owner’s personal expense
  • Full or partial ownership change within the last 2 years is considered a new business (not eligible)
*All projects are considered on a case by case basis per the SOP