Update on the 504 Loan for Refinancing from SBA
Attached below are the SBA press release and the key program talking points from today’s press conference.
Karen Mills, SBA Administrator held a press conference today to announce the implementation of the new ARRA refinance regulations for the SBA 504 loan guarantee program. Eric Zarnikow, Associate Administrator of the Office and Capital Access and Chris Crawford, NADCO President participated in a press conference.
The press conference provided SBA and NADCO the opportunity to convey
the benefits of these new refinancing provisions for small businesses
that are expanding their stores, facilities or fixed assets. The
ARRA, also known as the stimulus bill, provides refinancing provisions
will open up credit and potentially free up working capital for small
businesses by improving cash flow.
These provisions will also provide flexibility for banks and other small
business lenders that may have existing mortgage loans to qualifying
borrowers that are maturing in the next several years, and want to
reduce their credit risk by utilizing the benefits of the SBA loan
guarantees to reduce their loan-to-value ratios. This program also
enables these banks to maintain their relationships with their business
borrowers, while reducing their cost of reserves.
By making additional credit available to borrowers, this refinancing
program will also provide more opportunities for them to purchase new
real estate assets at more favorable prices in many markets. Not only
can these firms expand their plants; these transactions will help local
economies by reducing the inventory of commercial properties or bank
real-estate-owned. In turn, this can stabilize local commercial real
estate prices and restore these properties to expand local tax bases.
Participants were also interested to learn that 504 debentures were now
TALF eligible collateral for investors. Mills noted that over $80
million in 504 20-year debentures had been used to secure new loans by
investors in the past two months under TALF guidelines issues by the New
York Federal Reserve Bank.
In addition to the 504 refinancing regulations issued today by SBA under
provisions of the ARRA, Crawford noted that NADCO and SBA are now
reviewing proposed Congressional legislation that might temporarily
extend the benefits of mortgage debt refinancing to certain qualifying
small businesses that simply need to refinance their mortgages that are
coming due soon. He stated that 504 cannot stray from its Congressional
mandate of job creation through expanding small businesses. However, in
today’s recession 504 can also be used to retain jobs in small
businesses by temporarily enabling them to roll over mortgages that
contain short term “balloon” payments. This could enable businesses to
work with their primary bank lenders to secure improved terms and
stabilize their businesses, thus avoiding potential future defaults and
additional bank losses.
Mills and Crawford encouraged small businesses to contact the local SBA
offices, or go to SBA.GOV for
information on the 504 program, or to talk to their local bank lenders
about refinancing opportunities through 504. Additionally, potential
expanding small businesses can contact Certified Development Companies
in their community to learn more about applying for financing. These can
be located by going to NADCO’s web site at
NADCO.ORG.
SBA Press Release on Debt Refinancing
504 Refinancing Talking Points
Download the 504 Loan Kit
