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Borrower Benefits of Refinancing By Government Loan Programs

The U.S. Small Business Administration has been assisting small business owners through its 504 loan program since around 1980. Recently this program refinancing option was made permanent and has made the oportunities for business owners greater. These loans have long term, fixed interest rate features to assist property owner users to generated lower montly payments.

Initially introduced as a pilot program under Small Business Jobs Act of 2010, this program expired fall of 2012. Small business owners, lenders as well as SBA fought to bring it back so it was permanently reinstated in May 2016.

This gave business owners an additional way to free up equity in their properties and reduce their monthly loan payments. This loan program allows small business owners to refinance their commercial real estate up to 90 percent of loan to value. Compared to conventional cash out refinances of 70 percent, the 504 loan program is the mostly highly leveraged refinance in the commercial loan space. In addition, the transaction can include cash out totaling up to 20 percent of the appraised value of the assets. The maximum amount for cash out is 85 percent loan to value.

The way these loans are structured are that banks and lending institutions can provide a conventional loan up to 50 percent of the total project cost as a first trust deed. SBA certified development companies are typically non profit organizations are authorized to provide financing up to 40 percent of the project's cost and take a secondary lien position. Borrower contribution must be at least 10 percent of the projects appraised value, that may be satisfied through the borrower's equity in the collateral.

These loans are great for hotel construction loans restaurants, commercial buildings, gas stations, assisted living and many other types of uses.

The maximum refinance is up to 90 percent of the value of the property. On a cash out the maximum is up to 85 percent.

For any additional questions and loan scenarios please call Alex at 818-875-7710 or email a summary to