The transcript of the video follows below for further review.
Eligible small business owners now have more options to refinance eligible fixed assets and business expenses through the Small Business Administration (SBA) 504 Refinance Program. SBA Administrator Maria Contreras-Sweet made the program permanent. This change will help small business owners ease their financial burdens and create incentives for potential expansion and further job creation.
In making the announcement, Contreras-Sweet said: “As both a former small business owner and a banker, I know firsthand that access to capital is the single most important factor in the survival and growth of a small business. The 504 loan program with its long term fixed-rate can help refinance debt from adjustable rate loans with significant savings to borrowers. Paying off existing loans with a new loan at a lower cost can help increase cash flow, which can be especially helpful in a resurgent economy. That’s why I’m so proud to announce this Final Rule making 504 Refi permanent.”
As outlined, SBA will begin accepting applications from small business owners effective June 24, 2016. “For some time now, we’ve been making the case for the 504 Refinance Program with lawmakers, and now small businesses will have access to $7.5 billion under this program. Congress heard the combined voices of small business, lenders and SBA, and made the 504 Refinance Program permanent – a measure that I’m sure will prove essential in helping small business expand and strengthen the nation’s economy,” Contreras-Sweet said.
On December 18, 2015, Congress passed the Consolidated Appropriations Act of 2016, which made the 504 Debt Refinancing Program a permanent part of the 504 Loan Program. The 504 Refinance Program was originally a temporary measure under the Small Business Jobs Act of 2010. This temporary debt refinance program expired on September 27, 2012.
SBA is authorized to approve up to $7.5 billion for the regular 504 Loan Program and $7.5 billion in lending authority under the 504 Debt Refinancing Program, which brings the total 504 lending combined authorization to $15 billion.
The 504 Debt Refinancing Program is authorized to operate only in fiscal years during which the subsidy costs to the government are zero.
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Client received the SBA's Official 60-Day Notice for a loan that was obtained by her small business in 2001. The SBA loan went into default in 2004 but after hearing nothing from the SBA lender or the SBA for 20 years, out of the blue, she received the SBA's collection due process notice which provided her with only one of four options: (1) repay the entire accelerated balance immediately; (2) negotiate a repayment arrangement; (3) challenge the legal enforceability of the debt with evidence; or (4) request an OHA hearing before a U.S. Administrative Law Judge.
Client hired the Firm to represent her with only 13 days left before the expiration deadline to respond to the SBA's Official 60-Day Notice. The Firm attorneys immediately researched the SBA's Official loan database to obtain information regarding the 7(a) loan. Thereafter, the Firm attorneys conducted legal research and asserted certain affirmative defenses challenging the legal enforceability of the debt. A written response was timely filed to the 60-Day Notice with the SBA subsequently agreeing with the client's affirmative defenses and legal arguments. As a result, the SBA rendered a decision immediately terminating collection of the debt against the client's alleged personal guarantee liability saving her $50,000.
The client personally guaranteed an SBA 504 loan balance of $375,000. Debt had been cross-referred to the Treasury at the time we got involved with the case. We successfully had debt recalled to the SBA where we then presented an SBA OIC that was accepted for $58,000.
Clients obtained an SBA 7(a) loan for their small business in the amount of $298,000. They pledged their primary residence and personal guarantees as direct collateral for the loan. The business failed, the lender was paid the 7(a) guaranty money and the debt was assigned to the SBA. Clients received the Official 60-Day Notice giving them a couple of options to resolve the debt balance directly with the SBA before referral to Treasury's Bureau of Fiscal Service. The risk of referral to Treasury would add nearly $95,000 to the SBA principal loan balance. With the default interest rate at 7.5%, the amount of money to pay toward interest was projected at $198,600. Clients hired the Firm with only 4 days left to respond to the 60-Day due process notice. Because the clients were not eligible for an Offer in Compromise (OIC) due to the significant equity in their home and the SBA lien encumbering it, the Firm Attorneys proposed a Structured Workout to resolve the SBA debt. After back and forth negotiations, the SBA Loan Specialist assigned to the case approved the Workout terms which prevented potential foreclosure of their home, but also saved the clients approximately $294,000 over the agreed-upon Workout term with a waiver of all contractual and statutory administrative fees, collection costs, penalties, and interest.
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