SBA Announces Expansion to 504 Loan Program

The U.S. federal government recently revised the Small Business Administration’s 504 loan program to include certain working capital costs. Business owners can now refinance owner-occupied commercial real estate loans and include items such as rent, salary, and inventory.

The 20-year fixed interest rate for a 504 loan is currently 4.61 percent, according to Mercantile Capital Corp., a third-party 504 lender.

Loans that are refinanced under the new provisions are structured the same way as traditional 504 loans:

• A loan secured from a private sector lender with a senior lien that covers up to 50 percent of the project cost.
• A Community Development Company-secured loan with a junior lien that covers up to 40 percent of the project cost.
• A contribution from the borrower amounting to at least 10 percent of the project cost.

Business owners have until September 2012 to refinance under the new provisions.