New, simplified SBA 504 refinance loan is good for lenders

Lenders have been watching their loan-to-value ratios rise as commercial real estate appraisals continued to decline, often outside of the bank's internal and regulatory guidelines. Major changes to the SBA 504 temporary loan refinance program create a unique opportunity to bring a lender's owner-occupied commercial real estate portfolio back into regulatory compliance and reduce the overall commercial real estate portfolio concentrations. Additional benefits of this refinance program to lenders include:

• Enables the lender to assist clients and reduce the risk of the overall relationship
• Gives lenders a new financial product to attract new clients
• Allows for withdrawing equity in the property for working capital to support ongoing business operations

The basics of the SBA 504 refinance loan are simple:

• The debt to be refinanced must have been entered into at least 24 months prior to the SBA refinance application
• The qualified debt must be for a commercial loan which is current and has been paying as agreed under the original or modified terms for the past twelve months
• The eligible small business must currently occupy 51% of the property to be refinanced
• The refinanced amount can be up to 90% of the appraised value of the subject property
• Existing 504 projects and government-guaranteed loans are not eligible to be refinanced

This is temporary program that ends September 27, 2012, so lenders and small businesses need to act fast to take advantage of this great refinancing option.