Everybody’s Business

February 24, 2011

New Hope for Small Businesses On the Edge

By Colleen Schwarz, VP of Sales

Last week, the SBA (Small Business Administration) announced a new set of rules for its 504 refinancing program. This program now gives new hope for the "neediest" small businesses that are teetering on the edge between making it and going under.

The SBA said it would temporarily extend its 504 refinancing program to allow small businesses "without business expansion plans" to refinance their mortgage debt. (In our last blog, we announced that the Morgan Stanley SBA 504 program was available through CRF, (see "Giving Small Business Lending a Jumpstart").

What does this mean exactly? It means there's new hope for small businesses that are in dire need of assistance. Those businesses with a mortgage renewal due date before the end of 2012 (including some that are potentially facing foreclosure) now have a new lifeboat.

We know there's a huge pent-up demand by small business owners who need a longer-term solution to their debt issues.

Take, for example, a business that moved into their own building a year ago, when banks weren't offering long-term financing. The business owner may have taken out a three-year loan, and now has to find some way to refinance it. The new rules enable the owner to refinance and restructure this debt into a fully amortizing program, even if they have no plans to expand or purchase real estate or other fixed assets.

Because there's "only" $15 billion available for this temporary new program, the SBA is limiting the program to the "neediest" small businesses. However, they do plan to open the program up later (at an unspecified date) to other small businesses, if they haven't exhausted the finances allocated for this program.

The new SBA lending rules should help drive much-needed capital to businesses and the surrounding communities, helping them avoid the worse-case scenarios, like closing their doors.

SBA's goal with this program is squarely on saving small businesses that are on the brink. The SBA will refinance debt even if the small business has no plans to expand, add jobs, or meet any other higher objectives. And the new refinance rules also do not allow small businesses to refinance government program debt (SBA 7a) or an existing SBA 504 loan.

So it's a proverbial finger in the dike. But at least it's a start.

For more information on the SBA's 504 Loan Program Debt Refinancing Program, go to: http://files.e2ma.net/1963/assets/docs/504_refinance_field_training021611.pdf

Posted by: CRFUSA

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