Good news from the SBA. They have announced the elimination of most of the restrictions to the SBA 504 refinance program, which made it virtually impossible for borrowers to qualify.   This announcement was made on 10/19/2011.  Borrowers that applied or considered applying for an SBA 504 refinance and were declined/or discouraged from applying, should seriously consider re applying. Virtually all of the restrictions have been removed, and the benefits are substantial.Â
The demand for the program is expected to be huge, for the 11 months that are remaining on it (expires September 27, 2012). Borrowers can expect 90% loan to value financing, and with low, long term fixed rates.  There are no other loan programs available in the market, at this high of leverage, that come close to this. For example, most conventional commercial mortgages are currently capped at 65% loan to value. The only other high leverage alternative is another SBA loan (The SBA 7a Loan) that typically goes up to 80% - 85% loan to value.Â
But, virtually all banks structure the SBA 7a loan as a quarterly adjusting loan, tied to Prime. Whereas on the SBA 504 loan, fixed rates range from 3, 5, 10, 20 and even 25 years. And the interest rates are low. As of this writing, the blended rate on the 25 year fixed is in the upper 5%'s…   And lower on the 5 year fixed. While on the SBA 7a loan the quarterly adjusting rate is currently at 5.75% to 6%...Â
And of course, most borrowers, in this economy are worried about inflation, and where rates may end up in a few years. Having a quarterly adjusting rate is unsettling , to say the least.
As far as the removed restrictions they include:Â Â Â Â
-Existing loans "lineage" is no longer relevant. Before if more than 15% of the existing loan was ever used for any other reasons than the purchase of commercial real estate or equipment, than the loan was declined. And it didn't matter if you had refinanced your property several times before. For example if you used equity in your property to buy out a partner 30 years ago, that was an ineligible use, and therefore you did qualify.
-And you had to prove, with full documentation that none of the previous loans were used for ineligible purposes.
-Likewise, now you can actually use the proceeds of the loan to refinance working capital, lines of credit, payroll expenses, and technically get cash out (but banks won't likely let you do this).
-Appraisal had to be paid for and ordered prior to submission. This has been eliminated and now you can wait until you have an approval.
-The existing loan had to have a call or balloon, this has been eliminated.Â
-Loan is structure off of the existing loan amount rather than just the appraised value.Â
Bottom line, the program now has FLEXIBILITY. Most borrowers will easily qualify for it. If you want to get historically low fixed rates now is the time to act. The program is only available until September 27 2012.Â
The demand for the program is expected to be huge, for the 11 months that are remaining on it (expires September 27, 2012). Borrowers can expect 90% loan to value financing, and with low, long term fixed rates.  There are no other loan programs available in the market, at this high of leverage, that come close to this. For example, most conventional commercial mortgages are currently capped at 65% loan to value. The only other high leverage alternative is another SBA loan (The SBA 7a Loan) that typically goes up to 80% - 85% loan to value.Â
But, virtually all banks structure the SBA 7a loan as a quarterly adjusting loan, tied to Prime. Whereas on the SBA 504 loan, fixed rates range from 3, 5, 10, 20 and even 25 years. And the interest rates are low. As of this writing, the blended rate on the 25 year fixed is in the upper 5%'s…   And lower on the 5 year fixed. While on the SBA 7a loan the quarterly adjusting rate is currently at 5.75% to 6%...Â
And of course, most borrowers, in this economy are worried about inflation, and where rates may end up in a few years. Having a quarterly adjusting rate is unsettling , to say the least.
As far as the removed restrictions they include:Â Â Â Â
-Existing loans "lineage" is no longer relevant. Before if more than 15% of the existing loan was ever used for any other reasons than the purchase of commercial real estate or equipment, than the loan was declined. And it didn't matter if you had refinanced your property several times before. For example if you used equity in your property to buy out a partner 30 years ago, that was an ineligible use, and therefore you did qualify.
-And you had to prove, with full documentation that none of the previous loans were used for ineligible purposes.
-Likewise, now you can actually use the proceeds of the loan to refinance working capital, lines of credit, payroll expenses, and technically get cash out (but banks won't likely let you do this).
-Appraisal had to be paid for and ordered prior to submission. This has been eliminated and now you can wait until you have an approval.
-The existing loan had to have a call or balloon, this has been eliminated.Â
-Loan is structure off of the existing loan amount rather than just the appraised value.Â
Bottom line, the program now has FLEXIBILITY. Most borrowers will easily qualify for it. If you want to get historically low fixed rates now is the time to act. The program is only available until September 27 2012.Â