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What's Happening with the 504 Debt Refi Legislation?

Aug 2013

Many small business owners and lenders are asking about the pending legislation that would reinstate the popular Small Business Administration (SBA) 504 Debt Refinancing Program. Here's the latest.

Under an agreement by the chairman and ranking member of the Senate Committee on Small Business and Entrepreneurship, Senators Mary Landrieu (D-LA) and Jim Risch (R-ID), the 504 Debt Refinancing Program would become permanent in any fiscal year in which the regular 504 loan program is at a zero subsidy rate.

For FY 2014, the program is at a 1.71% subsidy rate. The National Association of Development Companies (NADCO) has been working on a fee package that would eliminate that subsidy, but so far it has not succeeded. The 1.71% subsidy rate requires huge fee increases to be eliminated.

The SBA has been working with NADCO on this problem. NADCO remains hopeful that in the coming weeks it will find an answer so that the 504 Debt Refinancing Program can be used in FY 2014.

Absent that, the industry will have to wait until the President's FY 2015 budget is released, which is expected in February, and the program's subsidy rate for that year is established. NADCO expects to see a significant improvement in the subsidy rate at that time as, according to the SBA, both the portfolio and program recoveries are improving significantly.

The temporary 504 Debt Refinancing Program helped 2,700 businesses refinance nearly $7 billion in old, expensive debt before it expired on Sept. 27, 2012. At that time, 400 small businesses had submitted loan applications that couldn't be processed before the program automatically sunset.

Under the program, borrowers could refinance up to 90% of the current appraised property value, plus 504 eligible refinancing costs, without the requirement of expansion, which is normally the case with 504 projects involving refinance.

Please continue to voice your support for the reinstatement of the 504 Debt Refinancing Program. Click here for an online directory of Congress.

Source: NADCO

For more information about SBA 504 loans in Florida, contact a Florida First Capital Loan Officer here.