SBA announces reinstatement of 504 refinancing program
Beginning June 24, 2016, the Small Business Administration will start accepting applications for its reincarnated 504 refinance program, designed to help small businesses alleviate the burden of high-cost real estate loans.
The program is not technically a new one. Forbes explained that it was originally a part of the Small Business Jobs Act of 2010, which was introduced as a means to help businesses obtain capital in a difficult commercial lending market. The refinancing program was supposed to be temporary and expired in 2012, but about six months ago, Congress agreed to bring it back permanently under the Consolidated Appropriations Act of 2016.
In the two years the program existed, 2,731 businesses applied for $2.5 billion worth of financing. The National Association of Development Companies, the trade association of SBA lenders, explained that when the program expired in 2012, there were still 400 businesses waiting to hear back on their applications.
In a press release, SBA Administrator Maria Contreras-Sweet emphasized the importance of this program for helping businesses increase their cash flow.
"As both a former small business owner and a banker, I know firsthand that access to capital is the single most important factor in the survival and growth of a small business," Contreras-Sweet said. "The 504 loan program with its long term fixed-rate can help refinance debt from adjustable rate loans with significant savings to borrowers."
What the program offers
The new program will allow those whose applications are accepted to make a down payment of only 10 percent and borrow 90 percent of the financing they need to purchase a property. $7.5 billion has been allocated to the 504 loan refinancing program, in addition to the $7.5 billion that has been allocated for the regular 504 loan program.
Contreras-Sweet expressed her confidence that the rebirth of the refinancing program will contribute to the strengthening of the economy as it helps small businesses gain more access to capital and grow.
SBA loans are appealing to small businesses for the increased ease at which they can obtain them. Because they are guaranteed by the SBA, it is often easier to qualify for an SBA loan than a conventional loan. The new 504 refinance program will hopefully increase small businesses' ability to gain favorable loan terms as well.
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