New Temporary Commercial Real Estate Program

Here is a program that might help small business owners who have purchased a
small commercial building or office or warehouse condo with a short-term bank
loan.  I am monitoring the program's status and will provide an update, but here is a short overview.

New Temporary Commercial Real Estate Program

The Small Business Administration is proposing legislation to temporarily allow small
businesses to refinance existing, qualified, owner-occupied, small business
commercial mortgages into SBA’s 504 program, which provides guarantees
supporting loans for the development of real estate and other fixed assets.
Currently, 504 loans must be used for new development or construction—and can
only include a limited amount of refinancing when businesses are expanding.

* Refinance Existing Loans into SBA 504 Structure: SBA’s existing
network of Certified Development Companies and private lenders already help
small businesses finance long term investments like real estate and heavy
equipment through a financing structure that includes a 50% private first
mortgage, a 40% SBA-backed debenture, and 10% borrower equity. With collateral
values falling and many banks pulling back on CRE lending, even
refinancing well performing loans has become harder. Under this new proposal,
borrowers with either existing 504 loans or conventional CRE loans could apply for
refinancing through the 504 program.

* Leverage Existing Infrastructure and Programs: SBA’s existing
network of Certified Development Companies and participating first mortgage
lenders will be able to deliver this program to borrowers quickly. Eligibility
would be similar to the existing SBA 504 program. Certified Development
Companies are SBA’s critical partners in this program, linking small
businesses and private lenders and helping to manage program risk.

* Target Performing Real Estate Loans: Eligible small businesses
will have commercial first mortgage loans or existing 504 first mortgage loans
that are maturing in the next year. In order to qualify, businesses will
have to be current on all loan payments for the previous year.

* Help Finance up to 90% of Current Property Values: Lenders that
are refinancing mortgages for existing customers will make a loan for up to
70% of the current property value; and SBA will help finance the remaining
20%. For lenders taking on a new refinancing project, SBA will take on a
greater share of financing, up to 40%.

* No Cost Program through Incremental Refinancing Fee: SBA’s
proposal for a temporary, zero-subsidy rate CRE refinancing program would be
funded through an additional fee for refinancing projects, and would not require
credit subsidy appropriations.

* Prevent Foreclosure: Borrowers can finance up to 90% of existing
property values through this program. By allowing eligible small businesses
to refinance their CRE mortgage into an SBA 504 loan project, this program
would provide creditworthy small businesses the opportunity to lock in
stable, long-term financing—and save jobs—by protecting small businesses from
unnecessary foreclosure.

* Free up Capital for Community Banks: Market research shows that a
large percentage of CRE mortgages are set to mature within the next few
years, and that nearly half of these mortgages are held by community banks. By
removing a percentage of existing CRE mortgages from their books, lenders
will free up capital that they can use to make more small business loans.

Source: SCORE

#smallbiz #Atlanta #Memphis #loan #smallbiz

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