SBA 504 Refinance Program Reauthorized by Congress

In 2016, SEED Looks Forward to Working with Small Businesses and Bank Partners to Refinance High Interest Rate Debt on Commercial Buildings and Machinery and Equipment

The SBA 504 Loan Refinancing Program has been permanently reinstated. Known as the Commercial Real Estate and Economic Development (CREED) Act, it will allow small business owners to refinance eligible business debt with an SBA 504 loan. Current interest rates are 4.8% for 20 years and 3.7% for 10 years.

Background: The SBA 504 Loan Refinancing Program was originally enacted in 2010, and expired in 2012. In two years, it was responsible for refinancing $5 billion of debt for small business owners at no cost to taxpayers, according to the National Association of Development Companies (NADCO), a trade association of Certified Development Companies (CDCs) like SEED.

The provision was placed into the omnibus bill that will fund the government for the rest of FY 2016. It will reauthorize the 504 refinance program to help business owners refinance their commercial mortgages.

The SBA has estimated that it will take 4-6 months to issue the regulations and forms needed to start the refinance program again. In addition, “Congress has added a few additional caveats on debt refi in exchange for its return,” NADCO stated. “The program can only be used in years that both standard 504 and the refi program are at zero subsidy. Additionally, a CDC’s 504 portfolio, by dollars, must be at least 50% standard 504 loans. Refi loans cannot make up a majority of the portfolio. A waiver provision exists if SBA sees good cause for additional refi loans to be made.

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