SBA 504 Loan Interest Rates
Official monthly SBA 504 effective interest rate tables can be found at Eagle Compliance LLC. 25- and 20-year term loans fund every month; 10-year term loans fund every other month. Effective interest rates are inclusive of servicing fees, which are subject to credit risk of the applicant.
The Small Business Administration (SBA) will begin taking applications for its new permanent 504 Debt Refinancing Program on June 24. This long anticipated program allows for the refinancing of commercial mortgages as well as other business debt and expenses without the requirement of expansion, which has historically been required.
Small business owners feeling the pressure of high-interest commercial mortgages can take advantage of up to 90% refinancing through Florida First Capital at below-market, fixed interest rates and repayment terns up to 20 years to lighten their monthly debt payments, improve cash flow and stabilize operations.
Overview of the 504 Debt Refinancing Program
• Loans made under the 504 Debt Refinancing Program are 504 loans and are subject to all applicable SBA 504 Loan Program requirements.
• 504 loan proceeds are to be used to refinance qualified debt with no money going toward expansion.
• For borrowers that refinance only long-term fixed asset debt (no cash out), the maximum LTV is 90% of the fair market value of the eligible fixed asset(s).
• Eligible fixed assets include land, buildings, machinery and equipment that were acquired, constructed or improved by a small business for use in its business operations.
• Single purpose or special use buildings, such as hotels, are also eligible up to 90% LTV even though they would typically require more equity to get SBA financing as long as all the debt to be refinanced consists of secured long-term fixed assets.
• Borrowers can also refinance eligible business operating expenses (cash out), however a maximum 75% LTV applies and the eligible operating expenses may not exceed 25% of the value of the fixed assets securing the qualified debt.
• Eligible business operating expenses includes salaries, rent, utilities, inventory or other obligations of the business that were incurred but not paid prior to the date of the refinance application or that will become due for payment within 18 months after the date of application.
• 504 refinancing costs may also be included in the loan.
Qualification Criteria
• At least 85% of the original loan was used to acquire, construct or improve fixed assets.
• The small business concern must have been in business for two years prior to submission of the refinance application.
• The property must be owner occupied, i.e., the business must occupy at least 51% of the total square footage.
• Debt must have been incurred not less than two years prior to the date the refinance application is received by the SBA.
• The loan to be refinanced must be current on all payments (no payment more than 30 days past due) during the last 12 months.
• An independent appraisal of the fair market value of the project assets and any additional assets offered as additional collateral must be provided. Appraisals are not required at time of application, but are required prior to closing and must be dated within 6 months of the date the application was approved by the SBA.
Loan Structure/Down Payment Schedule
• Total of first and second mortgages on refinance deals will be up to 90% (75% max LTV on cash-out deals); the structure will vary depending upon the transaction. Contact a Florida First Capital Loan Officer for a sample deal structure.
• In addition to a cash contribution, the borrower's 10% contribution can be satisfied by its equity in the eligible fixed asset (the 504 project) serving as collateral for the refinancing project or by the equity in any other fixed assets that are acceptable as collateral.
Restrictions
• Existing SBA 504 loans and other government guaranteed loans are not eligible.
For more information about the SBA 504 Refinancing Program in Florida, contact a Florida First Capital Loan Officer or email us at info@ffcfc.com. Phone: 850.681.3601 or toll-free at 888.320.5504.
