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SBA Offers Businesses New Refinancing Program

The Small Business Administration has launched a new temporary program that may help small businesses with real estate mortgages coming due or facing onerous balloon payments to refinance with a 504 loan at more favorable rates and avoid potential foreclosure , the agency announced today (Feb. 17).
The program, authorized by the Small business Jobs Act, will be in effect through Sept. 27, 2012.

The new loan is structured like the SBA’s traditional 504, with borrowers committing at least 10 percent equity and working with third-party lending institutions and SBA-approved Certified Development Companies in the standard 50/40 split. A key feature of the new program, the agency said, is that it does not require an expansion of the business to qualify.

The SBA will begin accepting refinancing applications on Feb. 28.

“The economic downturn of recent years and the declining value of real estate have had a significant, negative impact on many small businesses with mortgages maturing within the next few years,” SBA Administrator Karen Mills said in a statement. “As a result, even small businesses that are performing well and making their payments on time could face foreclosure because of the difficulties they face in refinancing and restructuring their mortgage debt. This temporary program is another tool SBA can provide to help these small businesses remain viable and protect jobs .”

The program will initially be open to businesses with immediate need due to impending balloon payments before Dec. 31, 2012. SBA said it will revisit the program later and may open it to businesses with balloon payments due after that date or those that can demonstrate strong need in other ways.

“We are making this initial restriction to make sure our funding goes first to small businesses with the most need,” said Steve Smits, an SBA associate administrator of capital access.