Refinancing Hotel SBA 504 Loan for Better Terms in California
This client had a loan with a higher floor and margin and was in the adjustable period. A low fixed rate for 5 years takes this client to July of 2017 and a margin of 3/4 of percent over prime renders a very reasonable rate in 2017 assuming that the PRIME index will be higher by then than it is currently at 3.25%.
A difficulty in placing this type of loan is that it is not having interested buyers in the secondary market and so most lenders, knowing they have to keep this type of loan on the books, avoid it and gravitate towards SBA 7a.
Another fluid factor in refinancing of 504 loans is that the SBA has to subordinate to the new lender and so a subordination application is placed with the SBA CDC that originally processed the SBA 2nd loan. In states where the SBA has faced many hotel loan defaults and foreclosures, if there is an increase in the loan amount, the SBA may not be willing to offer subordination.
Meanwhile, on SBA 504 loans, the FMLP (where the first mortgage could be sold in the secondary market) and the refiannce program (where a non-SBA loan could be refinanced with a 504 loan) both part of the 2009 Stimulus bill are expiring in September.
Scientific Capital had refinanced this hotel for the previous owner in 2006 and then for the acquisition of it by the new owners in 2008 attesting our client focused rather than transaction focused business model
Hello Mr. Ramin,
Thank you so much!
Kalpna and Hasmukh Patel