Balloon Mortgage Payment Coming Due for Your Business? Consider SBA Commercial Mortgage Refi

Mark Fearon | June 17th, 2011

The U.S. Small Business Administration (SBA) is accepting currently accepting applications for a commercial mortgage refinancing program that was created as part of the Small Business Jobs Act.

For many businesses these days, obtaining bank financing can be a challenge. Small businesses that have a commercial mortgage with a balloon payment due before December 31, 2012 now have another option if they aren’t able to refinance their loan through traditional bank financing.  The SBA is now offering a program to allow businesses in this situation to refinance their commercial mortgage loan through a 504 loan. A key difference between this program and traditional 504 loans is that this program does not require an expansion of an existing business.

The program is designed to assist small business owners who may be making all of their loan payments timely but are have difficulties refinancing due to lower real estate values, stricter bank regulations, or reduced profitability due to the current economy.  Businesses still work through a bank to obtain these loans. The bank will then work with the SBA to complete the necessary paperwork to refinance the existing loan.

Borrowers will be able to finance up to 90 percent of the current appraised value or 100 percent of the outstanding loan balance, whichever is lower, plus refinancing costs. This program cannot be used to refinance existing 504 projects or other government guaranteed loans.

The SBA began accepting applications for the program in February 2011 and will continue to process applications through September 27, 2012. The program is initially available only for businesses with balloon payments that will come due before December 31, 2012. The program could potentially be extended, but the SBA wants to initially focus on businesses with an immediate need.

Congress has approved up to $15 billion for this program, with $7.5 billion available in 2011 and another $7.5 billion in 2012. The SBA predicts the program could assist as many as 20,000 businesses.

For more information, visit the SBA’s website at www.sba.gov.

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