SBA 504 Aims to Help Surmount the ‘Wall of Maturities’

By Ravinder Kapur

Between now and 2017, $300 billion of commercial property loans are due to mature and most SBA lenders believe there’s a dire need to offer the U.S. Small Business Administration’s 504 refinance lifeline to private enterprises facing this “wall of maturities.” While the portion of commercial property loans pertaining to smaller companies may be in the region of only about $20 billion, the prospect of not being able to refinance this amount could play havoc with the finances of these firms.

In a recent article in Huffington Post by prominent SBA 504 loan originator and advocate Take the 504 RouteChris Hurn, he strongly recommends the re-introduction of the 504 refinance program, because it will benefit Main Street businesses by enabling them to lower their overall interest cost. The SBA 504 loan program operates with zero subsidies and is user-fee supported, meaning that it’s budget neutral and therefore a perfect means where public policy can support small business at this juncture.

The SBA’s 504 refinance program originated under the federal government’s economic stimulus efforts following the financial crisis, and existed for a period of 15 months before expiring in September, 2012. It enabled small businesses to refinance commercial property loans at low rates, but more importantly, it allowed existing loans that had originally qualified with acceptable collateral margins to be rolled over without having to be reappraised during the depths of the real estate crash.

While the program had been authorized for $15 billion, more than $12.5 billion remained unused at its close. Reinstating this facility will enable small businesses to free up capital to further re-invest in their businesses or utilize as working capital, with a resulting boost in job creation and economic growth.

The recently introduced ‘Commercial Real Estate and Economic Act of 2015′ (CREED) is currently before the House of Representatives, and if finally enacted, it will allow borrowers to refinance their maturing real estate debt. Congresswoman Judy Chu, who introduced the CREED Act, is a strong 504 refinancing proponent.

“Our small business sector is back at the heart of job creation after one of the worst economic downturns in history,” said Rep. Chu. “The best way to cement the gains of the still-fragile economic recovery is to put more capital in the hands of those job creators. And that is exactly what the CREED Act does.”

Chris Hurn, who is also the author of “Entrepreneur’s Secret to Creating Wealth,” a book that extensively describes 504 refinancing, said “If the federal government opens up refinancing to the 504 program once again, hundreds of thousands of small business owners, their employees and the American economy will benefit.”

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