SBA financing sources


Last week, Small Business Administration made a small effort to loosen up its lending restrictions for its SBA 504 loan program and allow business owners to refinance their existing debt and improve their cash flow. However, the small business owners must use the new money to expand under this new policy. Now everyone wonders how many business owners are brave enough to expand in this economy.

For those of you who don't know what SBA 504 program is, you can go to our website or our blogs to learn more. SBA 504 is designed to stimulate community development and generate new jobs. It is the least expensive and long term form of financing for business owners to typically purchase fixed assets, buildings and properties with minimum down payment. The typical structure of SBA 504 loan involves 3 parties. First a bank or lender originates the loan and approves it first, and is responsible for the first trust deed position of 50% of total loan amount.

Then the local Community Development Corporation (CDC) participates for the second trust deed position of 40%. Small Business Administration (SBA) is the final party that guarantees 100% of the loan to both lenders. SBA does not lend money. The new refinancing policy only applies to the second deed portion of the SBA 504 loan. It makes it easier for CDC to deal with expansion projects and give additional benefits to borrowers.

There are experts that are disappointed with this new policy and restriction of SBA 504 loan. Not that many business owners want to expand in this economy and those businesses that want to lesson their debt service won't be able to take advantage of the below market interest rates that SBA offers. Of course if Uncle Sam wants to truly stimulate lending, SBA should lift all these restrictions on refinancing.

For more information on SBA loan programs or other commercial financing solutions, please visit or call us at 877-900-1211.

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