Guest post by Dale Gunther
Interest rates are at historic lows, yet due to the decline in real estate values, you may wonder if your business can refinance its commercial mortgage. The answer is yes in many cases, thanks to a temporary loan refinancing program under the Small Business Jobs Act.
The 504 loan refinancing program is offered by the Small Business Administration (SBA) through Sept. 27, 2012. Borrowers can finance up to 90 percent of the current appraised value of available collateral, which could include fixed assets like commercial or residential real property. This program provides small businesses the opportunity to lock in long-term, stable financing and provide funding for business expenses by refinancing eligible fixed assets. Eligible fixed assets include:
— The purchase of land, including existing buildings
— The purchase of improvements, including grading, street improvements, utilities, parking lots and landscaping
— The construction of new facilities or modernizing, renovating or converting existing facilities
— The purchase of long-term machinery and equipment
Who’s eligible? Businesses that:
— Have at least 10 percent existing equity in the property or can inject equity of at least 10 percent (if you have more equity than this, you can finance existing qualified debt or may use the excess equity to obtain working capital for payment of eligible business expenses, such as rent, utilities or inventory)
— Have a commercial mortgage that is at least two years old
— Are current on their loan payments (i.e., in the last year, had no payments more than 30 days past due according to original or modified terms (including deferments), or if it had a modification, entered into the modification in writing prior to Oct. 12, 2011) and have successfully made all required payments for the past 12 months
— Do not have an existing government-guaranteed loan
— Are for-profit
— Have a tangible net worth of less than $15 million
— Have an after-tax profit of less than $5 million for the previous two years
— Occupy at least 51 percent of the property at the time of application
Loans under the 504 program are limited to $5 million for most refinances ($5.5 million for eligible manufacturing projects and projects that incorporate energy-saving technologies).
Access to working capital is currently one of the biggest credit gaps in the marketplace. The SBA’s 504 refinancing program can help close that gap and support businesses in remaining viable and vibrant. But remember, this program is only temporary, so talk to an SBA-preferred lender today to see if you qualify.
Dale Gunther is vice chairman of the board of People’s Utah Bancorp, the holding company for Bank of American Fork, which is an SBA-Preferred Lender, Equal Housing Lender and Member FDIC. At the start of his 16-year tenure as CEO at Bank of American Fork, the bank had two branches and $80 million in assets; it now has 13 offices and more than $880 million in assets. Dale has served as chairman of the Utah Bankers Association and currently serves as an American Fork city councilman. This article should not be considered legal or investment advice. Seek legal and investment advice from your o