New Options to Refinance Commercial Real Estate Loans

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SBA Now Offering Low Rates for Certain Working Capital Costs

ALTAMONTE SPRINGS, Fla.--(BUSINESS WIRE)-- The federal government recently released new regulations enabling business owners to refinance owner-occupied commercial real estate loans, and to include – for the first time ever – certain working capital costs. Small businesses facing high interest rates on commercial debt may now use loan refinancing proceeds for such working capital items as: salary, rent, utilities, inventory and other business obligations as part of a U.S. Small Business Administration 504 program loan.

The new refinancing regulations are part of the Small Business Jobs and Credit Act of 2010, and while the rules were drafted last year, the final regulations were just released this week. According to small business lender Mercantile Capital Corporation, the new guidelines may arrive just in time to help business owners struggling with high interest rate loans on commercial buildings and an inability to tap traditional working capital methods.

“The new provisions that enable owners to include business expenses in a refinancing project is a phenomenal development,” said MCC CEO Chris Hurn. “The government is responding to the cries of many entrepreneurs and small business employers who are desperately in need of any means to finance working capital costs.”

The loan structure for the refinancing program mirrors the traditional 504 loan structure. A third party lender, like MCC, funds a first lien portion (usually not less than 50 percent of the project costs), a Community Development Company (CDC) acting with the SBA funds no more than 40 percent of the project and the borrower funds no less than 10 percent of the project – which doesn’t necessarily need to be cash with these new refinance provisions. Interest rates on 504 loans have been hovering near record lows for most of 2011 (October’s rate is 4.61 percent fixed for 20 years).

One downside to the new loan provisions is that they expire in September of 2012. “While the deadline is nearly a year away, we encourage all commercial property owners to immediately investigate refinancing into a 504 loan,” said Hurn. “The rates are very low right now, and they’ll get to re-amortize their loan on a longer term with these business expenses now eligible to be rolled-in. But, this financing opportunity may not be available 12 months from now.”

A former member of the Inc. 500 list, Mercantile Capital Corporation focuses on providing SBA 504 loans for small business owners to acquire or enhance their own facilities. A wholly-owned subsidiary of Old Florida National Bank, the company has been named a Small Business Financial Services Champion by the U.S. Small Business Administration twice in the past four years. For more information on MCC and SBA 504 loans call (866) 622-4504 (toll free) or visit: http://www.SBA504LoanRefi.com or http://www.504Experts.com.