SBA Finalizes Rule to Lower Costs for Small Businesses

SBA Finalizes Rule to Lower Costs for Small Businesses

The United States Small Business Administration (SBA) recently announced a new rule aiming to make it easier for small business owners to refinance debt using the SBA 504 Loan Program. The SBA says the new rule will empower small business owners to reduce their debt payments and/or access more affordable capital for expansion or business growth.

The 504 loan program is designed to provide long-term, fixed rate financing for major fixed assets that promote growth and job creation. Loans, which can be used for things like equipment or real estate, are available through Certified Development Companies (CDCs), which are described as the SBA’s community-based nonprofit partners who promote economic development within their communities. Those CDCs are certified and regulated by the SBA, and the maximum loan amount for a 504 loan is $5.5 million.

The new rule, according to the SBA, will lower costs for many small businesses that are supported by the program. It follows the Federal Reserve’s September Rate Cut, which it says is already lowering borrowing costs for small businesses. The Administration says with its 7(a) Loan Program, about 200,000 borrowers will already see their monthly payments drop by 0.5%. These reduced payments will translate into approximately $360,000,000 in yearly savings for 7(a) borrowers.

SBA Administrator Isabel Casillas Guzman said the Administration is "laser-focused" on lowering costs for the American people, "including the incredible small business owners who make this country run."

“Coupled with the recent Federal Reserve interest rate cut, which is already benefiting small businesses and SBA borrowers, 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," she continued.  Guzman added that small businesses are the "engines of our economy," and that the 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.”

Hon. Isabel Casillas Guzman, SBA Administrator

When it comes to the 504 debt refinance direct final rule, the Administration has amended regulations that govern the 504 Program for debt refinancing with expansion —for small business owners seeking to refinance existing loans while also using loan proceeds to expand their business—as well as debt refinancing without expansion for owners seeking to refinance existing loans. The SBA says the changes will streamline the loan application process and expand eligibility criteria for small business borrowers. Most types of small businesses will be eligible and may benefit from the changes, it says.

According to the SBA, the changes include improvements that will simplify program rules, provide greater flexibility, and expand access to more affordable capital, while also making it easier for small businesses to refinance physical property, including land, facilities, and machinery. The improvements will also broaden the ways small businesses can use debt refinance loan funds and remove the requirement that borrowers demonstrate a minimum reduction in their loan payment from refinancing.

The 504 debt refinance direct final rule becomes effective on Nov. 15. Check with the SBA’s website or your lender for further details.