I’m loaded with information: SBA’s long awaited Final Rule for 504 Debt Refinancing is here. The new rule was posted on the Federal Register on July 29 and is effective immediately. It contains significant changes and eliminates several limitations, making it easier for us to do our jobs – and easier for borrowers to refinance debt. Importantly the new rule triggered revisions to SOP 10 5 6 incorporating changes made to the Economic Aid Act and the new rule. SBA details these revisions in Policy Notice 5000-808830.

As SBA continues streamlining forms and processes, there’s a new updated, fillable 504 Loan Application Form 1244, effective immediately for debt refi. For all other projects you have until September 30th. But why not start using it now? It’s on SBA’s Website.

So what’s changed? I’ve summarized in brief – very brief — a few changes here. You would be wise to check out the complete, detailed document on the Federal Register or at govinfo.gov for a section-by-section analysis, and keep it as a reference. The new refi rule:

  • For refi with expansion: increases the amount of existing indebtedness that may be refinanced from no more than 50 percent of the project cost of the expansion to no more than 100% of the project cost
  • Removes the condition that approval of a refinancing project will be in effect only in any fiscal year when the cost to the government for making guarantees under 13 CFR 120.882(g) and under the 504 Loan Program is zero.
    • In its place, this provision will state the conditions and requirements that will apply to the refinancing of a loan that is subject to a guarantee by a Federal agency or department; and
    • will require that the refinancing of any Federally[1]guaranteed loan will provide a substantial benefit to the borrower, e.g., the portion of the new installment amount to the debt being refinanced must be at least 10% less than the existing installment amount
  • reinstates an alternate job retention goal for the refinancing project
  • revises the definition of qualified debt
  • removes the prohibition against CDCs participating in the PCL Program using their delegated authority to make 504 loans

While done of us relishes plowing through detailed documents, I strongly recommend that you do it this time. Review them with your team and keep them handy for your reference.

At JRB, our 504 Team has reviewed the new refi regs. We were waiting a long time for them, and news of their content had already been leaked so there were no surprises. We’re just glad they were issued!  Some CDCs are expecting a significant increase in loan applications as a result of the new regs. If you get a sudden avalanche of applications, give us a call. We’d be glad to help you through them.

Richard Jeffrey
Senior Associate, CDC/504 Program