What's New
Refinancing
This new debt refinancing authority will allow expanding small businesses to restructure qualified existing debt as part of new 504 loans. This will enable small business owners to free up critical capital to expand their businesses and create jobs.
The following list is the conditions that a Project must meet to be eligible for debt refinancing:
1) The 504 Project must include expansion of a small business. “Expansion” is broadly defined to include any Project that involves the acquisition, construction or improvement of land, building or equipment for use by the small business.
2) The existing indebtedness to be refinanced may not exceed 50 percent of the Project Costs. The existing debt may consist of one or more loans and may be owed by an Operating Company, an Eligible Passive Company or both.
3) The borrower has been current on all payments dues on the existing indebtedness for not less thank 1 year preceding the date of refinancing.
4) The proceeds of the indebtedness to be refinanced were used to acquire land, including a building, to construct a building or to purchase equipment.
5) The existing indebtedness to be refinanced was incurred for the benefit of the same small business for which any new Project Costs are incurred.
6) The financing will provide a substantial benefit to the borrower when prepayment penalties, financing fees, and other financing costs are accounted for.
7) The existing indebtedness is collateralized by fixed assets.
Elimination of fees
As a result of the ARRA, several fees associated with the SBA 504 program have been eliminated. Traditionally, there is a 1.5% fee charged to the borrower by the certified development company processing the loan. as well as a .5% fee charged to the third party lender which is in turn passed along to the borrower. Both fees have been eliminated for an unspecified length of time. Funds were set aside to allow for the fees to remain in suspension until the funds are exhausted.
Energy Public Policy Goals
There are three distinct energy Public Policy Goals, two that allow for $4,000,000.
• $4,000,000 for a Project which “reduces the borrower’s energy consumption by at least 10%”. However, this cannot apply to a startup business. There cannot be a reduction of the zero energy consumption for a business which did not previously exist. This Goal can, though, apply to a new building for an existing business, which uses less energy than the prior location.
• Increased use of sustainable design ($2 million Goal) and production of renewable energy ($4 million Goal) can, of course, apply to new buildings, for a new business or otherwise, as a new building can incorporate features of sustainable design or renewable energy production.