New SBA 504 SOP Means Less Risk for Tax Payers and Less Regulation for Small Business Owners
SBA SOP 50(10) J, the new Small Business Administration regulations for the SBA 504 Fixed Asset Finance and Refinance program was released on Friday, October 16th. The new regulations will reduce some regulatory burdens for borrowers and will reduce some risk to tax payers. Highlights of the changes are provided below:
- Special Purpose Properties. Business owners buying gas stations, car washes, hotels, assisted living facilities, and hospitals will continue to require a low down payment of a minimum of 15% down payment for their first project financed with the SBA 504 loan program (with an additional 5% if the project is new). Subsequent special purpose projects will require a 20% down payment.Overall, the SBA reduced the number of industries considered “special purpose” because of new development standards that may not deem a project a special or single purpose use.
Properties financed with the SBA 504 loan that are not special purpose require a down payment as little as 10% for the business owner.
- Franchise Update. The SBA has created a Franchise Directory, which includes all franchise and other brands reviewed by the SBA that are eligible for SBA financial assistance. The brands on the SBA website at www.sba.gov/for-lenders registry will document all eligible franchises. If the franchise is listed on the website, no other review of the franchise agreement or eligibility of the franchise will be required, thus eliminating inconsistent decisions and backlogs. If the franchise is NOT on the registration, then the CDC must submit the franchise for a pre-application review.
- Energy Public Policy Update. Energy Public Policy Projects that allow a borrower to obtain multiple SBA 504 Loans when the fixed asset project reduces energy by 10% or creates renewable energy, has now limited these projects to no more than $16.5 Million in the aggregate per borrower.
- Refinance. Businesses seeking to refinance commercial real estate can continue to take advantage of pulling cash out for business expenses; however, the cap on cash out will be 20% as of January 2018 vs. today’s 25%.