SBA has broadened eligibility requirements for this program.  If your client is facing a balloon payment or is having challenges refinancing conventionally – this may be a viable solution.

Current SBA-504 Refi rate: 4.66%
Includes fees to CDC, SBA and central servicing agent. Based on pricing published by NADCO 5-8-12

Click HERE for interesting article on the new Refi program

Your client is likely eligible for this loan if you can answer YES to all of the following questions:

• Does the loan request meet all the basic requirements of a standard 504 loan request?
• Small business size standards
• 51% owner occupied real estate
• The credit request meets prudent lending standards
• Were the proposed debts for refinancing originated a minimum of two years prior to the date of the SBA loan application?
• Were substantially all (85% or more) of the refinance loan proceeds used for 504 eligible purposes?
• Were all loan payments current within 29 days of scheduled payment date for the debts proposed for refinance over the last 12 months?
• Were the debts proposed for refinance secured by the fixed assets to be pledged as collateral?
• Were there no debts included for refinancing that were federally guaranteed or part of the third-party lender portion of an existing 504 loan?
• Is the debt to be refinanced not owned by an associate of the OC or EPC?
• Was the debt proposed for refinance used for commercial purposes?
• Was the Operating Concern in operation for not less than two years prior to the date of SBA loan application to the SPLC?

Lender Certification

• When a lender is paying off their note through the 504 Refi product, the completion of SBA form 2416 is required along with the full loan payment history. Lender does not need to offer an interim loan but can use an escrow to fund debenture.
• When the lender is paying off a 3rd party’s existing debt, it will require the completion of SBA form 2288 and submission of 12 months payment history at the time of Refi 504 loan application. Lender will need to offer an interim loan in a similar structure to a standard 504 with its payoff at debenture funding.

Documentation Required

• Preparation of a standard 504 package
• An appraisal engaged ASAP with CDC/SBA identified as an authorized user of document; document will be used to establish eligible SBA loan structure and borrower equity in the subject project, if applicable.
• An environmental report ordered and scheduled to be available when the 504 loan application is submitted to the SBA Loan Center
• Copies of the original note, debt instrument and/or modification(s) secured to review the genealogy or history of the loan for SBA eligibility purposes
• Copy of the original deed for CRE and/or security agreement used to secure the collateral for the note to be refinanced
• Loan payment transcript from the preceding 12 months on all debts proposed for refinancing
• Loan payment transcript from inception on all debts proposed for refinancing if same institution debt
• 3rd-party lender in the 504 approval will need to recertify currency of the existing loan to be paid off by refinance package
• Lender certification that it is not aware of any pending default prior to refinance, causing a shift of immediate risk to the SBA

To get the necessary forms click here to find a Loan Expert in your area.

Loan Structure

Funding for a refinance project will come from (3) sources:

• 3rd-party lender – not less than 50%
• SBA 504 loan – not more than 40%
• Borrower contribution – not less than 10%

The combined loan amounts of 3rd-party lender and 504 loan must always meet the following criteria when structuring debt:

• The combined total loans in the 504 package may not exceed 90% of the appraised value of the fixed asset pledged as collateral
• The combined total of loans in the 504 package may not exceed the outstanding principal balance of the proposed debts for refinance