Today’s Rates are Historically Low – Now’s the time to Refinance!
The SBA 504 Program provides an easy solution to potentially save small businesses thousands on their monthly occupancy costs and provides an opportunity to access cash trapped in equity. With refinance rates at record lows, currently 3.03 percent on a 25-year fixed term, now is the most opportune time to refinance with an SBA 504 loan.
So the timing is right, the rates are low, but why utilize the SBA 504 Program to refinance? Easy – you’ll get the most bang for your buck. The SBA 504 loan is government-backed financing that comes with unbeatable terms. Additionally, under the CARES Act, there are even more benefits for business owners who refinance in the next couple months.
Six months of debt forgiveness
Under the CARES Act, the SBA will make payments on SBA loans for existing AND NEW SBA 504 loans. This means if a business owner refinances and funds the loan by the September 16th, 2020 debenture sale, the first 6 payments will automatically be paid by the SBA. Loans that are approved by mid-July will generally fund by September.
Access Cash Trapped in Equity
The majority of small businesses right now are strapped for cash. Many are applying for new loans, but that will not be enough. Refinancing with low rates and unlocking the trapped equity could help remedy the problem.
With the SBA 504 refinance program, business owners can obtain cash (up to 20 percent of the appraised value) to use on qualified business expenses, which include salaries, rent, utilities, inventory or other expenses of the business. With cash out, business owners can refinance up to 85 percent of the appraised value, as opposed to 90 percent without cash out.
Obtain a below-market fixed interest rate
The SBA 504 program offers business owners the opportunity to secure below-market, fixed interest rates, amortized over 25 years, for up to 90 percent of the appraised value of commercial real estate property.
Gain occupancy-expense predictability
Business owners can enjoy fixed occupancy costs and a repayment period of up to 25 years, with no balloon payments. With stable and predictable operating costs, business owners can accurately budget for years ahead.
Consolidate Multiple Loans
With the SBA 504 Refinance Loan, business owners can consolidate all their conventional loans into one – with a long term, low rate, allowing for increased cash flow and significant savings.
Are you eligible?
Just like a standard SBA 504 Loan, most small to medium sized businesses that operate for-profit in the U.S. quality for the program.
- The business and existing loan must be at least two years old and the borrower must own business during those two years
- 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
- SBA loans are ineligible for SBA 504 Refinancing
SBA 504 Loan Structure
The 504 refinance loan is structured like the traditional 504 loan, consisting of three parts: