Congress Passes SBA 504 Refinance Program

December 18, 2015

By Alex Cohen, CEO, Liberty SBF

Congress Passes SBA 504 Refinance Program

After years of advocating on Capitol Hill by commercial real estate industry leaders, the SBA 504 Loan Refinancing Program has been permanently reinstated more than three years after it expired in 2012. Also known as the Commercial Real Estate and Economic Development (CREED) Act, the program will allow small business owners to refinance eligible business debt into a new loan through the SBA 504 program.

Since the current SBA 504 program only allows for acquisition loans, this will dramatically increase the number of loans that can be funded under the SBA 504 program for many banks and third party lenders. One of the many key benefits of the SBA 504 program is that it is a fixed rate loan.

Some background: The SBA 504 Loan Refinancing Program (aka Commercial Real Estate and Economic Development (CREED) Act) was originally enacted as part of the Small Business Jobs Act of 2010. It expired in 2012 but in that time it was responsible for refinancing $5 billion of debt for U.S. small business owners at no cost to taxpayers, according to figures released by the National Association of Development Companies (NADCO), a trade association of SBA lenders and Certified Development Companies (CDCs).

How did this happen? The provision was placed into the omnibus bill that will fund the government for the rest of FY 2016. In a summary of the bill by the U.S. House Appropriations Committee it says that the agreement “…includes a provision to reauthorize the 504 refinance program at $7.5 billion to help business owners refinance their commercial mortgages…”

NADCO released a statement on Wednesday morning about the bill. “Congress has added a few additional caveats on debt refi in exchange for its return,” the statement said. “The program can only be used in years that both standard 504 and the refi program are at zero subsidy. Additionally, a CDC’s 504 portfolio, by dollars, must be at least 50% standard 504 loans. Refi loans cannot make up a majority of the portfolio. A waiver provision exists if SBA sees good cause for additional refi loans to be made.”

SBA has said that it will take up to six months before the refinance program can be restarted.