SBA Temporary Debt Refinancing Program
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The document summarizes the 504 Temporary Debt Refinance Program established by Congress in 2011. The program allows small businesses to refinance existing conventional debt into 504 loans to ease financial burdens. To qualify, the original loan must be at least 2 years old, 85% of original loan proceeds must have been for eligible expenses, and the application must be submitted before the September 27, 2012 deadline. The program provides benefits like consolidating multiple loans into one and does not require demonstrating improved cash flow.
SBA Temporary Debt Refinancing Program
- 1. 1 Summary of the 504 Temporary Debt Refinance Program Updated 4/9/12 In the fall of 2011, Congress initiated a temporary debt-‐refinancing program to allow small businesses to restructure their existing conventional debt as a 504 loan. The purpose was to ease the burden on small businesses by freeing up working capital and releasing funds for lenders to reissue as new business loans. Though Congress is currently reviewing a proposal to extend the program, as of now the program will end on September 27, 2012. To qualify for the program all applications must be complete and submitted by the deadline date to SBA. Below are the basic qualifications and highlights from the current program. Qualifications: • Original loan must have been made 2+ years ago • Loan must have been a conventional (non-‐SBA) loan • The third party lender must certify that they are not in a position to sustain a loss as a result of the refinance • Financing can equal up to 90% of appraised value or 100% of outstanding principal balance • Borrower can have no payments more than 30 days late in the past year, unless they have written consent of forbearance (permission to be delinquent) from the creditor • Borrower must supply previous 12 months payment history • Though appraisal of financed property is not required at the time of application, appraisal must be provided within 6 months of closing • Borrower must currently qualify with 51% of occupancy, even if not occupied at time of original loan • 85% of proceeds from the original loan must have been eligible 504 expenses (e.g. land, buildings, equipment, construction, and remodeling) • Up to 15% of proceeds may be used for eligible business expenses In addition the borrower must submit items typically requested when applying for an SBA loan including, but not limited to at least three years worth of signed tax returns, description of the purpose of the loan, and detailed descriptions of the property being financed. Special Notes • More than one loan may be combined and refinanced/consolidated into one • SBA proceeds must be fully disbursed within 6 months of approval • The same institution which originated the loan can also serve as lender for refinancing • Borrower DOES NOT have to demonstrate improvement on cash flow to qualify For additional information on the Temporary Debt Refinancing Program you may visit the SBA’s website at www.sba.gov or contact 5th Gear Consulting at 210-‐679-‐4621 or by email at info@5thgearconsulting.com.
- 2. 2 “It is a passion and insatiable drive to assist small business that propels 5th Gear Consulting.” Kara Clayton President, Express Metalwork 5th Gear Consulting is a business consulting firm specializing in SBA loans, strategic planning and development, and commercial real estate. Founded by Helena Hauk, the SBA San Antonio 2011 Small Business Financial Services Champion, 5th Gear Consulting has facilitated over $60 million in SBA loans, resulting in significant job creation and growth for Central Texas businesses. To learn more about 5th Gear Consulting, or to speak to your area representative, visit www.5thgearconsulting.com. Put Your Business Into Overdrive! 5th Gear Consulting 1001 San Pedro, Suite 101 San Antonio, TX 78216 210-‐679-‐4621 info@5thgearconsulting.com www.5thgearconsulting.com