504 Temporary Debt Refinance Checklist

SBA 504 Refinance General Eligibility Rules

Was the original debt(s) to be refinanced substantially (85% or more) used for eligible 504 purposes?  SBA will require the documentation for the original use of proceeds as well as the current obligation being refinanced.

___  Has the subject business been in operation for at least 2 years?

___  Has the debt(s) been outstanding for at least 2 years? No refinancing of existing SBA (including 504 first mortgage) or USDA loans.

___  Has the borrower been current (no payment deferrals or past dues of more than 30 days based upon a submitted bank transcript) on the note(s) for the past 12 months?

___ Project must satisfy all SBA eligibility requirements including the minimum occupancy level and job creation/retention criteria (1 job for every $65,000 borrowed unless the project meets a Community Development/Public Policy Goal).

 If project meets the general rules, then contact OSDC to discuss the following guidelines:

Program Eligibility Guidelines

1. Program is for debt refinancing only. No expansion or purchase of real estate or other fixed assets (Expansion with Refinance eligible under the regular 504 program).
2. The program offers the ability to cash out.  Excess equity (up to 90% LTV) can be used to:
• to pay down/pay off a line of credit
• fund building improvements or purchase machinery and equipment
• pay for eligible business expenses projected over the next 18 months
3. Maximum LTV is 90%. Additional collateral (real estate and/or equipment) can be pledged to supplement shortfall on project collateral.
4. Borrower’s contribution may be satisfied by its equity in the collateral being offered to SBA.  If there is a deficiency, it can be addressed by the current lender forgiving a portion of the debt, the borrower contributing cash, or a subordinated note from the current lender.
5. The 504 loan must be funded within 6 months of SBA approval.
6. Refinance loans are priced 17 basis points higher than regular 504 loans.
7. SBA 504 loan cannot be greater than the first mortgage loan.  There must be at least 10% equity in the collateral.
8. In the case of same institution debt, a complete transcript of the loan account must be provided.
9. Refinance loans must have SBA approval by September 27, 2012.

Contact Info 

Ohio Statewide Development Corporation

info@osdc.net

614-481-3214