The U.S. Small Business Administration (SBA) has finalized a rule that promises to lower costs for small businesses by streamlining access to debt refinancing and expanding the eligibility criteria for small business borrowers.
Effective November 15, 2024, the new rule amends regulations governing the SBA 504 Loan Program for:
- Debt refinancing with expansion – For small business owners seeking to refinance their existing loans while also using loan proceeds to expand their business
- Debt refinancing without expansion – For small business owners seeking to refinance their existing loans with or without cash out for eligible business expenses
The new rule includes the following 5 key items:
- Removing the 50% cap on debt refinance without expansion, This removes the prior rule that restricted the aggregate amount of refinance without expansion loans to not exceed 50% of the CDC’s total loan approval volume from the prior fiscal year
- Raising the loan to value requirement to 90% on debt refinancing without expansion that includes other business expenses and eliminating the cap on Eligible Business Expenses
- Aligning the “substantially all” standard for 504 debt refinancing with expansion to be consistent with the 504 debt refinancing without expansion standard of 75%. This expands access and streamlines loan processing
- Allowing certain “other secured debt” to be included as an Eligible Business Expense in 504 debt refinancing without expansion
- Revising the substantial benefit test for 504 debt refinancing with and without expansion when refinancing other government debt. This provides flexibility to allow any $ payment improvement to meet the requirement and expands borrower access
The above information is sourced, in part, from the National Association of Development Companies (NADCO) where Seedcopa + SeedcoDE Managing Director Sherwood Robbins is Director of Region 3.
