American Recovery and Reinvestment Act of 2009 and
the SBA 504 Program

When President Obama signed the American Recovery and Reinvestment Act of 2009 into law on February 17, 2009, the bill contained several changes which cover the SBA 504 Loan Program. Highlights of the bill include:

•    Fee Reduction
$375 million was appropriated to eliminate fees in the SBA 7(a) and 504 Programs. For a period of time the SBA will stop collecting the bank participation fee and the borrower will not be responsible for paying the HCDC processing fee. This is a savings of over 2% of the 504 loan. This is a temporary change that will go away when all the appropriated funds are spent.

•    Job Creation
A permanent change to the Small Business Investment Act is to increase the job creation ratio from one job per $50,000 to on job per $65,000 of SBA financing. Projects in enterprise zones, empowerment zones or labor surplus areas require one job per $75,000. For small manufacturers the job creation goal is one job per $100,000.

•    Refinancing
Another permanent change allows a 504 project to include a limited amount of debt refinancing. The refinancing cannot exceed 50% of the project costs, proceeds will be used to acquire land, to construct or expand a building or to purchase equipment, the existing debt is collateralized by fixed assets, it will provide a substantial benefit to the business by providing better terms or interest rate, and the borrower is current on all payments of the existing debt for not less than one year.
   
Please contact HCDC for more information concerning these changes to the SBA 504 Program.