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SBA 504 Q&A: Refinancing Loans Previously on Deferment

Sep 2020

Q: Can a borrower that has an existing loan that was previously on deferment be eligible to refinance their debt under the Small Business Administration (SBA) 504 Loan Program?

A: No, per the Code of Federal Regulations (CFR) Sections 120.882(e)(6) and 120.882(g)(15)(vii), the applicant must have been current on ALL payments due on the debt to be refinanced for not less than one (1) year before the date of the application (without expansion) or for not less than 1 year before the date of the refinancing (with expansion).

“Current on all payments due” means that no payment was more than 30 days past due from either the original or the most recent loan.

However, given SBA’s awareness that borrowers may have loans that have been granted deferments in the past few months as a direct result of the COVID-19 emergency, and that some of these borrowers are interested in refinancing their debt under SBA’s 504 debt refinancing programs, the SBA has temporarily put into place an exception for 504 debt refinancing for applicants granted loan deferments due to the COVID-19 emergency.

Through Dec. 31, 2020, a loan that is currently on deferment, or that was granted a deferment, will qualify for 504 refinancing under the following conditions:

1. The applicant must bring itself current on all the payments that were deferred prior to the loan being approved for debt refinancing. The applicant must make up any payments as if no deferment was ever granted. Documentation supporting that all payments have been brought current must also be provided in a form of a letter from the bank and updated bank transcript; AND

2. The deferment on the loan to be refinanced must have been granted on or after March 1, 2020, and the applicant must include a statement in their application that the deferment was granted due to them being adversely affected by COVID-19; AND

3. The applicant must otherwise be current on all payments due as required by 13 CFR Sections 120.882(e)(6) and 120.882(g)(15)(vii).

If you have a question for our SBA 504 loan experts, email us at info@FloridaFirst.com or call 850.681.3601 or toll-free at 800.504.LOAN.