Small Businesses May Catch a Break: Small Business Administration is Funding Commercial Loan Refinancing for Loans Maturing By End of 2012

25 Feb

Struggling small businesses may catch a break based upon a new, temporary program from the U.S. Small Business Administration.  Beginning February 28, 2011, the SBA will begin accepting refinancing applications under this new offering within its 504 loan program.  The program applies to commercial loans that will mature or otherwise have balloon payments due on or before December 31, 2012.

Historically, 504 loans have been used to foster long-term financing opportunities for small businesses by providing them with fixed rates and the flexibility of a low initial equity contribution (as low as 10%).  The businesses could then finance up to 90% of the cost of the proposed project or improvement by receiving an SBA guaranteed loan for up to 40% of the cost of the project.  This portion of the financing is funded by an SBA Certified Development Company and secured by a second mortgage.  The availability of subordinated financing reduces the risk and enhances the prospect of bringing in a private lender, which then funds up to 50% of the project cost and receives a first mortgage to secure its loan.

The new program will tweak the standard 504 loan protocol to suit the goal of refinancing those loans reaching maturity owed by stressed, but viable, businesses.  The borrower may refinance the lesser amount of 90% of the current appraised value of the property, or 100% of the existing loan, as well as certain costs associated with the refinancing.  You can read more about the loan program at the Costar Group’s website on its “Headlines” page, here.

There are signs of revitalization in the world of commercial real estate, and this new SBA program has the potential to further that growth, one small business at a time.  If you’re a business owner looking to expand, modernize, or simply to seek relief from the squeeze of an existing loan coming due, or if you’re a commercial lender, we at Thomsen Nybeck provide prompt, efficient and cost-effective legal services to both commercial lenders and borrowers.

Matt Drewes contributed this post.  Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and the firm’s Creditors’ Remedies Group., and practices in the areas of business and real estate litigation and transactions, construction litigation, community association law, debtor/creditor law, insurance and employment.  He has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years, and has been quoted on issues involving construction litigation, community associations and real property issues in the Minneapolis Star Tribune, Minnesota Lawyer, Yahoo!finance.com, Bankrate.com, and elsewhere.  He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

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One Response to “Small Businesses May Catch a Break: Small Business Administration is Funding Commercial Loan Refinancing for Loans Maturing By End of 2012”

  1. Attorney Funding April 11, 2011 at 1:02 am #

    Its about time! Small businesses are the backbone of this country, and deserve a break. Lawmakers have finally rewarded small businesses, as well as attorneys who need funding.

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