Real Estate Debt Consolidation: Why go 504?

Commercial real estate interest rates are currently at historical lowsWhile this is great news for new buyers, it may be hard to hear for others who took out loans 2-5 years ago. However, business owners with commercial debt can still take full advantage of these low rates through real estate debt consolidation and refinancing.

Many small business owners who have purchased a building are faced with high interest rates and large mortgage payments that raise their monthly expensescut into profits, and diminish cash flow.  Real estate debt consolidation in today’s lending environment is a potential solution to this problem.  By consolidating real estate debt with a fixed, lower-interest rate loan, businesses can decrease their monthly costs and retain working capital  

Plenty of lenders offer real estate debt consolidation services, but all business owners should familiar themselves with the Small Business Administration’s (SBA) 504 Refinance Program, a program specially designed for them. Through the SBA 504 Refinance Program, business owners can refinance their existing conventional real estate loan to a more affordable and advantageous SBA 504 loan. The 504 loan allows for commercial real estate financing with a low injection and a record low interest ratecurrently 2.26%  fixed for 25 years.  By utilizing the SBA 504 Refinance Program, business owners can lower their monthly occupancy costs and access cash trapped in equity. 

Bottom line – if you are a small business owner considering real estate debt consolidation or refinancing to lower your monthly payments, the SBA 504 loan is an excellent option

Advantages of 504 Refinance Loan

The SBA Refinance Program is designed to help small business owners access equity trapped in commercial real estate.  Through the SBA 504 refinance program, several conventional real estate loans can be consolidated and refinanced at below market rates. The best part is, the monthly payments are fixed for the life of the loan, which provides business owners control over their occupancy costs for the long term.

  • Financing up to 90% of the appraised property value
  • Cash out for eligible business expenses up to 85% of the appraised property value (business expenses are limited to 20% of appraised value)
  • Below-market interest rate, currently, 2.26% FIXED for 25 years, 2.21% FIXED for 20 years , or 2.38% FIXED for 10 years on 504 loan
  • The ability to consolidate multiple loans

SBA 504 Refinance Eligibility Requirements

To be eligible for the SBA 504 Refinance Program:

  • The business and existing loan must be at least two years old and the borrower must own business during those two years.
  • The original loan must not be subject to a government guarantee.
  • At least 85 percent of the original loan must have been used for a 504 eligible asset, such as owner-occupied real estate, land or equipment.
  • The borrower must be current on all payments for at least the last 12 months prior to the refinance application.

Support from a Certified Development Company (CDC)

Debt consolidation and refinancing may sound intimidating, however, another major perk of the SBA 504 loan is that a Certified Development Company (CDC), such as TMC Financing, is there to support small business owners every step of the way. CDC’s help create the most optimal financing package for your project and guide you throughout the entire loan process. Designed to be a small business’ advocate, a CDC is a great resource for small business owners looking to refinance commercial real estate debt.

Get Started Today

For small business owners looking to consolidate commercial real estate debt, the SBA 504 Refinance Program is the most advantageous option. It provides an easy solution to potentially save thousands on monthly occupancy costs.

In addition, with cash-out refinance rates at their all-time lows, many small business owners can utilize the 504 Refinance Program to strategically recover from the financial impacts of the coronavirus. A 504 refinance loan could generate access to much needed cash during this difficult time.

To learn more about SBA 504 refinancing options, contact a local Certified Development Company to get started. If the business is located in California or Nevada, contact one of TMC Financing’s loan experts for a consultation or no-cost prequalification.