Small businesses looking to expand now can refinance existing loans used to buy real estate and other fixed assets through the U.S. Small Business Administration”™s 504 Certified Development Company loan program.
Part of federal stimulus legislation enacted this year, the permanent changes to the SBA loan program will allow small businesses to restructure eligible debt to help improve their cash flow. That in turn will enhance their viability and support growth and job creation, SBA officials said.
The 504 loan program can be used to buy business real estate or fixed assets, such as heavy equipment or machinery, and expand current development projects. The refinanced debt cannot exceed 50 percent of the projected cost of the expansion.
“This is one more piece of the Recovery Act that is going to have a direct impact and put more money in the hands of small-business owners just when they need it most,” SBA Administrator Karen G. Mills said when announcing the changes. “Lower interest rates mean lower payments and less money going out the door each month in debt repayments. That means more cash on hand to keep their doors open, their employees working and to even expand and create more jobs.”
The 504 program changes follow a series of small-business relief measures implemented by SBA and included in the American Recovery and Reinvestment Act. The agency has temporarily raised to 90 percent the guarantee level on many of its 7(a) program loans and has reduced fees on both 7(a) and 504 loans. It also doubled to $5 million the surety bond guarantee level for small businesses competing for construction and service contracts.
In June, the SBA America”™s Recovery Capital loan program became available for viable small businesses facing immediate financial hardship. Loans of up to $35,000 are fully guaranteed by the agency and interest-free to borrowers, whose payments are deferred for 12 months.
