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RVIA: SBA Program Providing Loan Refinancing

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January 10, 2012 by   Leave a Comment

The Recreation Vehicle Industry Association (RVIA) is advising the industry that loan refinancing programs remain available under the Small Business Jobs Act with the Small Business Administration (SBA) implementing a temporary program— effective until Sept. 27, 2012 —allowing small businesses to refinance eligible fixed assets in its 504 program without requirement of an expansion (usually required under this loan program).

This program provides small businesses the opportunity to lock in long-term, stable financing, and finance eligible business expenses as well as protect jobs and hire additional workers. Key program changes were made in April 2011 and with the issuance of a final rule, effective October 12, 2011. These changes are highlighted in bold type.

Key Program Features

• SBA launched this temporary program on Feb. 17, 2011, and began accepting loan applications on February 28, 2011. The program will end on Sept. 27, 2012.

• Beginning Oct. 12, 2011 borrowers can finance up to 90% of the appraised value of available collateral, which could include fixed assets acceptable to SBA (for example: commercial or residential real property). This allows borrowers with more than 10% equity to be able to obtain additional proceeds to pay for eligible business expenses.

• The Small Business Jobs Act authorized SBA to provide funding to small businesses for additional business expenses not originally part of the debt being refinanced. On Oct. 12, 2011, SBA revised the program to allow financing of eligible business expenses. Any expense directly related to business operations is eligible. Examples include: indebtedness to the business, salary, utilities, inventory, or insurance.

• In April 2011, SBA expanded the program parameters by allowing any business with a commercial mortgage that is two or more years old to refinance its debt, regardless of maturity.

• The program is structured like SBA’s traditional 504 loan program: borrowers will work with third-party lending institutions and SBA-approved Certified Development Companies (CDCs), typically private, non-profit organizations to obtain financing, in a traditional 10%/50%/40% split. However, the program no longer requires the third party lender to be 50% of the Project. The third party lender amount must be equal to or greater than the SBA amount. This allows the small business to maximize the amount of long-term, low interest, fixed rate financing available.

• SBA estimates that as many as 8,000 businesses may participate in this program during the current fiscal year, which will provide up to $7.5 billion in SBA-guaranteed financing leading to total project financing of almost $17 billion.

The program, which is completely separate from SBA’s traditional 504 program, is zero-subsidy, requiring no cost to the taxpayer: It will be funded entirely through additional fees assessed for refinancing projects.

Further information in the form of a Program Fact Sheet can be found at http://www.sba.gov/content/504-loan-refinancing-program or through a Frequently Asked Questions Page at http://www.sba.gov/content/faq-new-temporary-504-refinancing-program.

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