504 Refi Projects – Cash Out Equity

The SBA 504 loan program DOES permit refinance projects where cash out equity is received.
Here’s how it works…

Request:
Refinance $400,000 existing Qualified Debt* plus $300,000 for Business Operating Expenses**. Property appraised at $1,000,000.

Acceptable Structure:
Refinancing Project (Appraisal)           $1,000,000
Qualified Debt                                        $400,00
Business Operating Expenses             $200,000
TOTAL PROJECT FINANCING                $600,000

Third Party Loan                                    $300,000
SBA 504 Loan                                         $300,000
Borrower Equity Contribution             $400,000

Comments:
All of the $400,000 Qualified Debt can be included, while only $200,000 of the requested in Business Operating Expenses can be included. Business Operating Expenses are limited to 20% of the Refinance Project amount. In this case, $200,000. Total loan to value remains below the 85% maximum for transactions involving Business Operating Expenses.

*Qualified Debt – a commercial loan incurred not less than two years before the date of application which was originally used to acquire an eligible fixed asset.
**Business Operating Expenses – business expenses including salaries, rent, utilities, inventory, or other business obligations incurred but not paid prior to the date of application or that will become due within the next 18 months.

With historically low SBA 504 interest rates, now is the perfect time to take advantage of the SBA 504 Debt Refinance Program. Call FDDC at 605-882-5115 to discuss a refinance project for your existing or prospective clients!