Mariner Square is the first marina in Alameda as you enter the Oakland/Alameda Estuary. Not only is it a storage facility and a boat valet on the Bay, but it is also home to a small community of boaters in the Bay Area. These boaters trust Mariner Square to care for their boats as they were their own, and that is what Mariner Square does.
When the owner of Mariner Square learned of the SBA 504 Refinance Program through his banker, Vicente Lopez with First Bank, he realized it was an opportunity he could not pass up. Rates were at record lows and the opportunity for cash out would help his business thrive.
“The SBA 504 Program provides an easy solution to save businesses thousands on their monthly occupancy costs and provides a fantastic opportunity to access cash trapped in equity,” explains Kurt Chambliss, executive vice president of TMC Financing who facilitated the SBA loan. “It was a perfect solution for Mariner Square.”
When refinancing with an SBA 504 loan, business owners can obtain up to 20 percent of the appraised value of the property in cash out. The cash can be used on qualified business expenses, which include salaries, rent, utilities, inventory or other expenses of the business.
“The cash out was one of the most appealing features of the program,” states the owner of Mariner Square. “I was able to cover inventory, utilities, payroll, and most importantly, just get some breathing room. I can look 10 years down the road and know I will still be comfortable. The cash will also help us expand.
“The interest rate was also a huge attraction. We previously had a high, compound rate and now we’re fixed for 25 years at a really low rate! What a difference that makes.”
The SBA 504 Refinance Structure
Business owners can refinance up to 90 percent of the property’s appraised value, 85 percent if the business owner is getting cash out. The equity contribution from the business owner can be taken from the subject property, without any additional injection.
The 504 refinance loan is structured like the traditional 504 loan, consisting of three parts:
- A 1st mortgage secured with a first lien from a conventional lender covering 50 percent of the project cost;
- A 2nd mortgage secured with a second lien from a CDC (Certified Development Company), such as TMC Financing covering up to 40 percent of the total cost; and
- A contribution of at least 10 percent equity from the small business borrower.
“For Mariner Square, the new mortgages were split 50/50 between the first mortgage from First Bank and the second mortgage from the SBA,” explains Chambliss. “First Bank is in a comfortable position at 29% loan-to-value and Mariner Square gained lower monthly payments, a clean balance sheet, and access to cash that was trapped in their real estate.”
“The process was seamless thanks to First Bank and TMC Financing,” said the owner of Mariner Square. “They guided me every step of the way.”
SBA 504 Refinance Eligibility
Most for-profit small to medium sized businesses are eligible for SBA 504 Financing. To refinance with the SBA 504 loan, there are a few more things to consider:
- The business and existing loan must be at least two years old and the borrower must own business during those two years
- The original loan must not be subject to a government guarantee
- At least 85 percent of the original loan must have been used for a 504 eligible asset, such as owner-occupied real estate, land or equipment
- The borrower must be current on all payments for at least the last 12 months prior to the refinance application
There is no doubt that covid-19 will not be the one and only crisis that will shed light on the need for savings and liquid capital. The SBA 504 Refinance Program is a powerful tool and a fantastic opportunity to obtain cash and lower monthly payments.
If you have any questions about whether you can qualify for refinancing with an SBA loan, it is best to contact a Certified Development Company (CDC) like TMC Financing. A CDC is a nonprofit organization built to support economic development within its community through the SBA’s 504 loan program. CDCs guide business owners through the entire loan process and can work through various scenarios with you.
About TMC Financing
TMC Financing is the nation’s No. 1 SBA 504 lender. TMC has provided about 10 billion in SBA 504 financing to nearly 6,000 businesses. If you are thinking about refinancing commercial debt, their 504 loan experts can help. Regardless of where you are in the process—they can guide you through the next steps.