Business Owners Have New Options for Refinancing Commercial Real Estate

Congress recently passed a bill which permanently reinstates a debt-refinancing provision to the SBA’s popular 504 loan program for owner-occupied real estate.  Beginning in mid-2016, small business owners can refinance commercial buildings with the low rates and favorable terms offered through the SBA 504 program. According to executives at Fountainhead Commercial Capital, the change in the program will be a boon to small business owners nationwide.

“We have been pushing for reinstatement of refinancing for years,” said Chris Hurn, CEO of Fountainhead.  “I testified before Congress about it, wrote about it extensively and discussed it with anyone who would listen for the past several years.  We are very pleased to see that this phenomenal financing option will now be available for small business owners who want to refinance their properties.”

Hurn and Fountainhead offered answers to some key questions about SBA 504 refinancing.

What types of projects will qualify?

Owner-occupied real estate projects up to about $15 million typically qualify.  SBA 504 refinancing loans can also include renovation costs and heavy equipment.  Loans typically involve a first lien on the commercial property of 50% of the total project amount, and a second lien loan, secured by a 100% SBA-guaranteed debenture covering 40% of the total project cost. Finally, a down payment contribution, typically of only 10%, comes from the borrower.

When will refinancing loans be available?

It will likely take several months for the SBA to ramp up the program, but we urge those interested in refinancing to contact us as soon as possible.  The SBA managed this program a few years ago, and we are hopeful that the ramp-up time will be swift, hopefully prior to summer.

Why would a small business owner consider refinancing with the 504 loan program?

The 504 loan program offers long-term, below-market, fixed interest rate loans.  Many small business owners purchased their buildings using conventional loans with much higher down-payment requirements and now face rising rates and loan maturity dates that can hinder business growth.

What are current interest rates and terms for refinancing?

The exact interest rates will not be known until the program is up and running in mid-2016, but a typical project financed today has a 20-year, fixed rate loan at 4.8%.

Fountainhead Commercial Capital, a nonbank lender specializing in the SBA 504 loan program, was founded by some of the most experienced and awarded SBA 504 lenders.  The company’s FastTrack504™ program enables banks and credit unions to fully outsource SBA 504 loans for owner-occupied real estate.  More information is available at www.Fountainhead504.com or by calling 800-770-1504.