Orlando Real Estate News

WASHINGTON - June 25, 2009 - Easing current rules, the U.S. Small Business Administration said Wednesday that small businesses will be able to refinance existing loans used to purchase real estate and equipment.

The SBA made changes authorized by the Obama administration's recovery plan to alter its 504 loan program.

"Lower interest rates mean lower payments and less money going out the door each month in debt repayments. That means more cash on hand to keep their doors open, their employees working and to even expand and create more jobs," Karen G. Mills, SBA Administrator, said in a statement.

But in a teleconference announcing the refinancing, the nation's small business agency was questioned about the ability of small companies to take advantage of the program. The refinancing can only be used for businesses for expansion, which includes an acquisition, construction or improvement of land, and building or equipment. Up to one third of the total loan package can be refinanced.

To qualify, borrowers also must be current on debt being refinanced for one year prior to the date of refinancing.

"It's for expanding businesses and not many companies are expanding right now," said Christopher Hurn, chief executive of Mercantile Capital Corp., which makes 504 loans. He would rather see refinancing that allows small businesses to use cash to invest in hiring, marketing or other needs.

Others see it as an opportunity for businesses to buy office space instead of renting.

"The side benefit is it's going to allow small businesses to buy real estate," said Christopher Crawford, president of the National Association of Development Cos., which represents development companies that make 504 loans.

Another problem for small businesses is finding a lender that is participating in any SBA loan program. Since January 2008, many banks have dropped out or stopped making SBA-guaranteed loans. On March 16, the agency temporarily raised to 90 percent the guarantee level on 7(a) general-purpose loan and reduced fees on both the 7(a) and 504 loan.

Mills said more than 500 lenders have returned to the SBA lending program since dropping out last October or earlier.

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