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SBA 504 Loans Now Allow Refinancing of Small Business Debt



During a press conference on June 24 with Eric Zarnikow, Associate Administrator of SBA's8217;s Office of Capital Access and Chris Crawford, President of NADCO (http://www.nadco.org) 's8211; the trade association of America's8217;s Certified Development Companies - Mills outlined the new refinancing provisions for small businesses that are expanding their stores, facilities or fixed assets.



The new refinancing provisions will also provide flexibility for banks and other small business lenders who want to reduce their credit risk on existing mortgage loans that are maturing in the next few years that were made to qualifying borrowers. By utilizing the benefits of SBA loan guarantees, lenders will reduce their loan-to-value ratio and maintain their banking relationships with their business borrowers while reducing their cost of reserves.



By making additional credit available to small business borrowers, this refinancing program will also provide more opportunities for them to purchase new real estate assets at more favorable prices in many markets. Not only can these firms expand their plants, these transactions will help local economies by reducing the inventory of commercial properties or bank-owned real estate. In turn, this can help stabilize local commercial real estate prices, restore these properties to active use and expand local tax bases.



SBA 504 debentures are also TALF eligible collateral for investors. Administrator Mills noted that over $80 million in 504 20-year debentures have been used to secure new loans by investors in the past two months under TALF guidelines issued by the New York Federal Reserve Bank.



Chris Crawford indicated that NADCO and the SBA are in the process of reviewing proposed Congressional legislation that could temporarily extend the benefits of mortgage debt refinancing to certain qualifying small businesses 's8211; specifically those that simply need to refinance mortgages that are soon coming due. He stated that 504 cannot stray from its Congressional mandate of job creation through small business expansion, however in today's8217;s recession, 504 loans are often being used to retain jobs at small businesses by temporarily enabling them to roll over mortgages that contain short-term 's8220;balloon's8221; payments. This allows businesses to work with their primary bank lenders to secure improved terms and stabilize their businesses, thus avoiding potential future defaults and additional bank losses.



Mills and Crawford encouraged small businesses to contact their local SBA offices, go to www.sba.gov for information on the 504 program, or talk to their local bank lenders about refinancing opportunities through 504. Additionally, small businesses planning to expand should contact the Certified Development Companies (CDC) in their communities who can provide details on applying for financing. A directory of CDCs is available on the NADCO web site www.nadco.org.



About the National Association of Development Companies



Created in 1981, the National Association of Development Companies is the trade association for America's8217;s Certified Development Companies (CDCs). Certified by the U. S. Small Business Administration, CDCs are community-based economic development organizations that serve their local communities and states, and are dedicated to the promotion of small business expansion and job creation through SBA's8217;s 504 Loan Program. In addition to the 504 program, many CDCs also provide small businesses with access to other Federal, state, and local economic development loan programs.



Based in the suburbs of Washington, D.C., NADCO provides legislative and regulatory support for the 504 Loan Program on behalf of CDCs, the program's8217;s lending partners (including first mortgage lenders, attorneys and others allied to the industry), and 504 small business borrowers. For more information, please call (703) 748-2575 or visit www.nadco.org.






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