Useful refinance program made permanent to help businesses grow

Don Mercer
Posted by Don Mercer
Small Business Banking

A lot of what went on during the Great Recession we’d all like to forget. But there’s at least one thing that has been resurrected from that period that every small business owner may be happy to see.

Asian-American woman working in flower shop talking with a customer.The SBA 504 Refinance Program, which was designed to help small businesses lower financing costs, improve cash flow, and grow, has now been made permanent. The program is one of many lending programs offered by the Small Business Administration (SBA), a federal agency focused on helping entrepreneurs start and grow small businesses.

As one of the top SBA lenders in the country, we see the value of this program every week, which provides long-term, fixed-rate financing — and now refinancing — for fixed assets, such as commercial real estate and equipment. So I have no doubt business owners will welcome the SBA and Congress’s recent decision to permanently revive the SBA Refinance Program, which was originally a temporary lending program from 2010 to 2012.

Under the permanent program, the SBA began accepting applications from small businesses on June 24.

What makes this program worth considering?

  1. The program allows businesses with conventional loans to refinance into 20- or 25-year, fixed-rate loans. These SBA loans provide competitive rates, longer maturities (which translates to lower monthly payments), and the stability of a fixed rate so a business owner has a predictable payment.
  2. There is a cash-out refi option. This means a business can refinance debt and take advantage of equity in their property to withdraw cash to reinvest in their business.
  3. The maximum loan-to-value limit for refinancing is 90% and limited to 75% if you want to take cash out.

The bedrock of the SBA 504 program is it offers long-term, fixed-rate loans with very competitive rates. With an initial $7.5 billion approved to lend for the first year, this new refi program greatly expands the potential for us to help our small business entrepreneurs.

SBA Administrator Maria Contreras-Sweet said it best when she announced the refi program: “The 504 loan program with its long-term fixed rate can help refinance debt from adjustable rate loans with significant savings to borrowers.  Paying off existing loans with a new loan at a lower cost can help increase cash flow, which can be especially helpful in a resurgent economy.”

For more information, see the full announcement.

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