Wednesday, July 1, 2009

SBA 504 Loan Program Debt Refinancing

The details for SBA 504 limited refinancing are here! This is a permanent change to the SBA 504 Loan Program. Below are some highlights of the new legislation. For more information, please contact your local MCDC rep.

Eligibility highlights:

  1. The 504 Project must include expansion of a small business. Expansion includes 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% of the new Project Costs. Example: a $500,000 expansion would allow up to $250,000 to be refinanced. This would make the total loan eligible for 504 financing $750,000; typically at a 50/40/10 split (50% bank/40% SBA/10% borrower).

The existing debt to be refinanced under the 504 must meet the following criteria:

  • It must be for 504 eligible assets such as a building or equipment.

  • The financing will provide "substantial benefit" to the borrower such as improving the borrower's payment by 10%.

  • The borrower must have been current on all payments for the past year.

  • The refinancing must provide better terms or rate of interest than the existing debt.

As mentioned, this post only touches on the highlights of the refinancing program. Please contact MCDC with specific project questions.

The MCDC is committed to growing the economic base in Michigan. 100% of our staff is located in our great state, which means our loan officers are close by to assist you and all of our loans are approved and serviced locally here in Michigan.

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