ELIGIBILITY

Projects and Borrowers

  • Applies to existing debt on eligible 504 owner occupied (at least 51%) commercial real estate and/or fixed assets
  • The debt must have been incurred at least two years prior to the date the application is received by the SBA.
  • The debt being refinanced must have been current for the past year with no payment being deferred or past due for more than 30 days.
  • At least 85% of the debt being refinanced must have been used for 504 eligible purposes. All of the proceeds must have been used for the benefit of the business.
  • The amount of the new bank loan, plus the 504 loan, cannot exceed 90% of the appraised value of the property and/or fixed assets. In no event may the refinanced loan exceed the outstanding principal balance of the debt being refinanced, excluding eligible soft costs (see Eligible Use of Proceeds section below).
  • The bank must provide at least 50% of the financing.
  • If the amount of the refinance is not sufficient to repay the entire outstanding debt, the bank must disclose how the balance of the debt will be handled:
    • a) accept a new note for the balance which will be subordinated to the liens of the bank and the SBA. Such notes will contain at least a three‐year stand‐by requirement.
    • b) accept payment from the borrower for all or part of the deficiency
    • c) the bank forgives all or part of the deficiency

ELIGIBLE USE OF PROCEEDS

In addition to refinancing the existing debt, the following soft costs can be included in the project total as long as the total refinance package does not exceed 90% of the appraised value. Eligible soft costs include:

  • Professional fees directly attributed and essential to the project, such as title insurance, opinion of title, appraisals, environmental, and legal fee related to zoning, permits, or platting and…
  • Repayment of interim financing including points, fees and interest and…
  • Premier Capital closing fee

BORROWERS CONTRIBUTION

  • The borrower’s contribution can be satisfied by the equity in the Eligible Fixed Asset(s) serving as collateral for the refinancing project OR by the equity in any other fixed assets that are acceptable to the SBA.
  • The borrower can use a combination of cash and equity (as described above) to satisfy the equity contribution.
  • An independent appraisal (current within 6 months) of the fair market value of the project assets and any additional assets offered as additional collateral must be provided.
  • The appraiser must be State Licensed or State Certified and prepared in compliance with Uniform Standards of Professional Appraisal Practice and use one either the Self‐Contained or Summary option.

RESTRICTIONS

  • No refinancing of loans with an existing federal guaranty, e.g., 7a, USDA or a loan already part of a 504 project.
  • No refinancing of debt to an Associate of the Borrower or Venture Capital
  • No refinancing where the creditor on the debt to be refinanced is in a position to sustain a loss causing a shift to the SBA.

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