Refinance your Commercial Real Estate Loan for Lower Monthly Payments in 2021

The SBA 504 Program has helped millions of businesses expand and gain control of their future by offering affordable financing to purchase commercial real estate. The program has also played a key role in helping businesses following the COVID-19 crisis. By refinancing your commercial real estate loan with an SBA 504 loan, businesses can lower their monthly payments and access trapped cash.

The SBA 504 Program is a unique financing option that allows small businesses to buy, construct, or refinance fixed assets (i.e., commercial real estate or equipment) with only 10% down and a below-market interest rate, fixed for 25 years. It was created by the Small Business Administration to serve as an economic development tool by providing businesses with access to quality, affordable capital while simultaneously boosting job creation.

The ability to refinance with the SBA 504 Program started as a pilot program but was made permanent in 2016 after lenders and small business owners fought for its existence. For small business owners with commercial real estate loans, the SBA 504 Program is the most advantageous way to refinance.  It continuously proves itself to be a fantastic tool for businesses looking to improve their cash flow or need an infusion of cash.

Refinance Your Commercial Real Estate Loan for Lower Monthly Payments

The SBA 504 Loan is equipped with a below-market fixed rate. For most of 2020, the rates have been at historic lows, and are fixed for 25 years. The low rate, currently 2.66 as of December 2020, combined with the long repayment period, ensures lower monthly payments as the amortization is spread out over 25 years.

Refinance Your Commercial Real Estate Loan for Cash Out for Working Capital

In addition to helping businesses lower their monthly payments, borrowers can leverage their building’s equity and take cash out for eligible business expenses, such as salaries, rent, utilities or inventory. This is a fantastic way to consolidate and restructure existing debt while also accessing equity in your building.

SBA 504 Refinancing Benefits Extend Beyond Cash

A small business owner can refinance up to 90% of their property’s appraised value with an SBA 504 Loan. With cash out, up to 85% can be refinanced. The existing equity most often fulfils the 10-15% injection requirement.

Related: How an LA marketing firm saved thousands a month following refinancing with the SBA 504 Program, Alameda Marina Refinances with SBA 504 Loan to Access Cash and Lower Monthly Payments, SBA 504 Refinance Loan Slashes Hotelier’s Occupancy Costs and Helps them Survive Coronavirus Pandemic

The record low interest rates and long term make the SBA 504 Program unbeatable in today’s market. In fiscal year 2020, the program provided over 7,000 loans totaling over $5.8 billion to small businesses in need. This loan activity is indicative that the terms of the 504 loan are unlike any other financing option.

SBA 504 Refinancing Eligibility

Most businesses in the U.S. that operate for-profit are eligible for the SBA 504 Program. The business must occupy at least 51% of the property or 60% if it is new construction. Additionally, to refinance with the SBA 504 Program:

  • The business and existing loan(s) must be at least 2 years old
  • Existing loan(s) must not be more than 30 days past due in past 12 months
  • At least 85% of existing conventional loan must have been for SBA 504-eligible purposes
  • Loan must not be subject to a federal agency guarantee
  • An appraisal is not due at time of application, but is required for funding

How to Refinance your Commercial Real Estate Loan for Lower Monthly Payments or Cash out

To get started with the SBA 504 Program, locate a local Certified Development Company (CDC), such as TMC Financing. TMC Financing is the number one CDC in the Western Region of the U.S. and is licensed to operate in California, Nevada, and Arizona.

Your local CDC can prequalify you and guide your through the entire application process.

With rates at record lows right now, you will not find a better time to refinance your commercial real estate loan! Utilize the SBA 504 Program for lower monthly payments, cash out, and gain better control over your future.

If you’re a small business owner in California, Nevada, or Arizona, contact us to get the process started.