The US Small Business Administration (SBA) loan programs often go through several changes and it was in September 2011 that it received the last few updates with the passage of the Small Business Jobs and Credit Act. Among all the changes, one of the most significant changes was the 2-year provision that allows the small business owners to use the 504 loans to refinance their commercial real estate debt and finesse their business finances. Since the entire nation is pulling through the upshots of the economic recession, the small business firms are the hardest-hit among the lot. Large numbers of business firms are drowning under a crushing debt burden; both secured and unsecured, and are trying hard to pull themselves out of the mess. Just as you can opt for personal mortgage refinancing in order to grab better terms and condition on the new mortgage loan, you can also opt for 504 refinancing in order to take advantage of the low interest rates and re-amortization of the commercial property terms. Read on the concerns of this article to know more on this refinancing program for the small business organizations.
Some vital facts on the temporary 504 loan refinancing option for businesses According to market reports, there are a large percentage of outstanding commercial mortgages that are about to mature in the next few years. With the decline in the real estate values, the small business firms are also performing well and are making their payments right on time but still they’re going through a tough time while refinancing their commercial mortgage loans. The Small Business Jobs Act tour determined that it is even tough for the business firms to get access to working capital and this is creating the largest credit gap within the market. This is the reason behind implementing the temporary program, allowing the distressed business firms to refinance their fixed assets through the 504 program.
The 504 commercial mortgage refinancing program – How does it work? Through the 504 commercial mortgage refinance program, the borrowers can finance up to 90% of the appraised value of the collateral that is available, and this may include fixed assets like residential or commercial property. The borrowers who have more than 10% equity may get additional working capital to pay off their business expenses. This program is structured through the 504 loan program and you can work with the 3rd party lending institutions and the SBA-approved CDCs (Certified Development Companies) to get the financing. This is a temporary program that is intended to benefit the small businesses that have maturing loans and properties that have declined in value due to the recession. The ongoing program will assist the business firms to lessen the amount that they need to pay towards the mortgage loans and instead use the amount to keep their business firms afloat. In order to make the business firms eligible for the aforementioned program, the debt requires being incurred 2 years before the date of applying for the refinance. The SBA has extended the program in order to include the loans that matured after 31st December 31, 2012. The SBA estimates that about 8000 businesses will seek help of this refinancing program in the fiscal year 2013. For further details on the program, you may visit the SBA website in order to enhance your knowledge. From the perspective of the taxpayers, the 504 mortgage-refinancing program is certainly a better deal that can benefit you during times of need. Although some critics might argue that the provision will force the business owners to use their commercial real estate like an ATM, yet this analogy doesn’t seem to apply here. Small business firms create the lion’s share of jobs within the economy and many firms have curbed their costs in order to stay afloat in this tough economic situation. The 504 refinancing program helps them stay on the right financial track and maximize their profits.
Author Bio: Stephenie Miller is a financial writer with specialization on various aspects of finance. She has prolific knowledge on the contemporary financial issues and contributes her articles to various blogs, communities and websites. Some topics covered by her are on the details of the debt industry, mortgage industry, real estate tips for the first time borrowers, personal finance strategies and many more.