Worried about a balloon payment coming due on your commercial mortgage?
The Small Business Administration may be able to help.
The SBA announced a new temporary 504 loan program today to help small businesses facing maturity of commercial mortgages or balloon payments through refinancing.
Typically, a 504 project includes three elements: a loan (or first mortgage) secured with a senior lien from a private-sector lender covering up to 50 percent of the cost, a second mortgage secured with a junior lien from an SBA certified development company (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business borrower.
A key feature of the new program is that it does not require an expansion of the business in order to qualify, officials said.
SBA will begin accepting refinancing applications Feb. 28. The program will be in effect through Sept. 27, 2012.
“The economic downturn of recent years and the declining value of real estate have had a significant, negative impact on many small businesses with mortgages maturing within the next few years,” SBA Administrator Karen Mills said in a news release. “As a result, even small businesses that are performing well and making their payments on time could face foreclosure because of the difficulties they face in refinancing and restructuring their mortgage debt. This temporary program is another tool SBA can provide to help these small businesses remain viable and protect jobs.”
Borrowers will be able to refinance up to 90 percent of the appraised property value or 100 percent of the outstanding mortgage, whichever is lower, plus eligible refinancing costs.
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