JRB’s 504 Webinar Series. Wow. Guess we’ve got a hit on our hands. We’re excited at the positive response to Session #1 of our 504 Webinar Series addressing important issues in our industry. More than 150 attendees joined JRB Senior Associate Sandy Mortan, SBA 504 expert Jan Garlitz and me for Session #1. Join us for Session #2 of our Free Bi-Weekly Webinars on Thursday, June 4 at 1 p.m./Eastern. If you haven’t signed up already, register just once for access to all session
Answering Your Questions. At JRB, our panel of experts will continue answering your questions and addressing breaking news about the 504 Program. During our webinars, CDCs are invited to ask questions relevant to the webinar topic. We’ll try to answer them during each webinar and will cover the questions and answers in future eBulletins. During Session 1 we answered a question with possible relevance to the immediate future.
Q: With today’s low fixed rate there’s a lot of interest in the 504 Debt Refi Without Expansion loan. As you know, loans must be current in order to be refinanced. But some businesses have had their loans deferred. The question: Would SBA make an exception due to the COVID-19 pandemic and allow use of the program to refinance?
A: SBA doesn’t mince words. A Qualified Debt must be “current” during the past year to be eligible for Debt Refinancing Without Expansion. “Current” means no deferments during the past year. This is in the SBA regulations [13 C.F.R. Section 120.882(g)(15)(vii)]. To change this, SBA would need to do new rules – in the middle of the COVID-19 emergency – to either amend the Debt Refi Without Expansion rule or get a new rule. Or get Congress to legislate. In the middle of the emergency. In an election year.
Wham! That noise was the door getting slammed.
Case Closed? Not So Fast. There’s another, reasonable, alternative. SBA can process a loan application for 504 Debt Refinance WITHOUT Expansion of a loan even if it’s deferred. The application will need to be sent to SBA Headquarters for Legal Review since the debt would be in default because of the deferment. But hey! There’s hope.
What About WITH Expansion? While we’re at it, let’s take a look at 504 Debt Refinance WITH Expansion of a loan on deferment. Yes, SBA can process that as long as:
- the borrower demonstrates that deferment on the debt to be refinanced was granted due to the pandemic and a government-mandated closure of the business; and
- the deferment is terminated as if it never happened, with the borrower paying the deferred amounts in full so the debt is current before the application is approved. In other words, the “no deferments during the past year” requirement would not apply.
Coming up: JRB 504 Webinar #2, June 4. We’re kicking around topics having to do with underwriting and closing a new loan when the borrower has a disaster loan. Also more exciting news about deferments. If you have suggestions for future topics let me know.
And if you haven’t signed up for our Webinar Series, there’s One-time Registration for access to all sessions. Of course, if you have questions, email email@example.com. We’d love to answer them in JRB eBulletins
Senior Assistant, CDC/504 Programs