New SBA Rule Simplifies Debt Refinancing for Small Business Owners
What’s happening in The White House? It might be an election year, but the Biden-Harris administration is hard at work on new initiatives aimed at small businesses. Recently, SBA Administrator Isabel Casillas Guzman announced a change to the SBA’s 504 Loan Program that stands to make it easier for business owners to refinance debt. The 504 Loan Program, according to the SBA’s website, “provides long-term, fixed rate financing for major fixed assets that promote business growth and job creation.” This new rule change, which goes into effect on November 14, 2024, will help streamline access to debt refinancing for small business owners, allowing them to “reduce their debt payments and/or access more affordable capital for expansion or growth.”
As we know, the Federal Reserve recently made a September rate cut, which is already making it cheaper for SMBs to borrow money. According to Administrator Guzman, “SBA’s new rule will help business owners lower costs by streamlining access to debt refinancing so they can reduce payments and access more affordable capital. Small businesses are the engines of our economy, and the Biden-Harris Administration is delivering remarkable progress to improve their bottom lines and help them continue to fuel America’s historic economic recovery and Small Business Boom.”
Key Updates to the 504 Loan Program
Regulations have been amended as they relate to:
- Debt refinancing with expansion; this applies to business owners who want to refinance their existing debts while using the loan proceeds to expand their business
- Debt refinancing without expansion; this applies to business owners who want to refinance their existing debts
Changes will simplify the application process and broaden eligibility criteria for borrowers. Put simply, this will make it easier for SMBs to refinance land, equipment, or facilities. Lower monthly payments, “including for debts incurred when originally financing these fixed assets,” will allow business owners to reinvest in the growth of their company.
Additionally, the rule expands how businesses can use the money they receive from refinancing. It does so by removing the requirement that borrowers “demonstrate a minimum reduction in their loan payment from refinancing,” according to the SBA.
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