NADCO Reports SBA's New 504 Loan Refinancing Program is Enabling Nation's Certified Development Companies to Help Small Businesses Grow

MCLEAN, Va., Feb. 10, 2012 /PRNewswire/ -- The National Association of Development Companies (NADCO), the trade association for the nation's 270 Certified Development Companies (CDCs), said that the Small Business Administration's program to enable businesses to refinance debt using 504 loans is a huge success. 

The refinancing program opened in October 2011 and is set to expire in late September 2012.  A large percentage of commercial mortgages outstanding are set to mature within the next few years, particularly those held by community banks.  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. 

SBA estimates that as many as 8,000 businesses may participate in this refinancing 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. Recent interest rates have been as low as 4.91% for 20-year SBA 504 refinancing loans.

Chris Crawford, President of NADCO said, "Thousands of small businesses can improve their cash flow and extend existing debt -- as well as getting needed cash out -- under this new refinancing program.  And in this economy, that is a significant boost.  It will help expand those businesses, create jobs and benefit consumers too in the long term."

Joe Wolfe, Chairman of NADCO, said, "The refinance program is a great shot in the arm for small businesses with existing commercial loans.  We're very excited that NADCO and its members are in the forefront of helping small businesses grow and thrive."

The SBA 504 loan is designed to help small business owners get long-term financing for capital assets such as the purchase of real estate and equipment.  In most cases, a 504 project includes a first mortgage from a private-second lender that covers 50 percent of the cost, an SBA-guaranteed second mortgage from a CDC that covers 40 percent of the cost, and 10 percent equity from the borrower.  Over 130,000 businesses have obtained SBA 504 loans over the past 25 years, and $50 billion in debentures have been funded, leading to more than $100 billion in small business financing projects.

The basic requirements for qualifying for a 504 refinancing loan are:

• The small business must be for-profit and have a tangible net worth of no more than $15 million and an after-tax profit of no more than $5 million on average for each of the previous two years.
• The small business must occupy at a minimum 51% of the property at the time of the refinance application.
• The property must have been acquired at least two years ago with commercial debt.
• The loan must be current and that the borrower has not made any payments more than 30 days after the due date under original or modified bank terms for the past twelve months.  Such modifications of terms must have been entered into prior to October 12, 2011.
• The project structure must be based on the current appraised value of the collateral.
• Up to 90% of the current appraised property value may be refinanced.
• Existing government-guaranteed loans are not eligible to be refinanced.

About NADCO

The National Association of Development Companies (NADCO) is the trade association for the nation's Certified Development Companies (CDCs).   Our members are non-profit organizations that serve every state, as well as Puerto Rico and U. S. territories in the South Pacific.  CDCs have been certified by the U.S. Small Business Administration (SBA) to provide financing to small businesses through the SBA 504 loan program.  For more information, contact at CDC in your area by visiting the NADCO website, www.nadco.org.

SOURCE NADCO