SBA 504 Refinance Case Study
A decade ago, Susan bought the property where her business is located for $800,000. At that time, she paid 25% and took out a $600,000 loan at 5.5% with a 20-year amortization. Her current payment is $4127 monthly. This means after a decade of payments, she still owes $450,000. Her business has been successful, but she is netting less than before due to inflation and competition. Over the years, she has had to borrow on various loans and credit cards to purchase business assets or meet cash flow needs. If we determine that she owes $100,000 on various lines and cards and her payments are approximately $2,000 monthly, then her debt appears as below:
$450,000 mortgage loan
$100,000 business debt
$550,000 total debt with payments equaling $6,127
Today, the building on her property has appreciated and is worth one million. The 504 Refinance allows cash out up to a quarter of the value of the building for business debt and even upcoming debt for the next 18 months (unpaid payables, payroll,etc). If she refinances, debt would appear as below:
$450,000 mortgage payoff
+$100,000 business debt
+150,000 working capital, cash for business use
$700,000 new mortgage
This debt would be a $400,000 and then another at $300,000 from the SBA. The blended rate on the 2 loans would be approximately 4.6% and the blended amortization would be 23 years.
Her NEW payment for the SBA 504 Refinance of both loans will only be $4,157. She would save almost $2,000 monthly and receive $150,000 in cash to use for her business expenses – essentially free of payments.
How much could you save with the new 504 Refinance Program? We can help show you. Call (501) 374-9247 to schedule a consultation with one of our lending professionals.
NOTE: Current SBA loans cannot be refinanced on this program. The debt must be non-government debt.