A business is purchasing a building, say for $1,000,000, and they have fixed asset debt that meets all of the 504 program refinance eligibility requirements. Evergreen Business Capital can include 50% of expansion costs, or $500,000, of the debt in the new 50/40/10% structure. If the debt is over 50%, can we then add the remaining money to the lender's first mortgage as a refinance outside of the 504 project?
Brad Erickson, Evergreen's Credit Administrator says, "The excess of over 50% of the new project expansion costs can be added to the lender's loan only if it is debt already secured by the same property being expanded, the project property. It cannot apply to debt secured by other refinanced property or equipment, non-project property."
Although 504 refinance for expansion eligibility was announced in February 16, 2009 in conjunction with ARRA fee relief, this is a permanent change to the program and does not sunset.
The 504 industry has recommended consideration of a further addition to the 504 program to allow refinancing for projects that do not involve an expansion. This will require a legislative change. We are monitoring legislation to see if this 504 program change is approved.