The following points highlight the challenges and the achievements of this project:

1) SBA 504 can be refinanced with a 7a loan: In this project, we refinanced the 504 first TD, the SBA debenture in the 2nd position, and the nearly $450,000 of renovation and PIP (Property Improvement Plan) cost. The refinancing of the existing first trust deed keeping the SBA debenture in place would have been the first choice but the project involved partner buyouts where every other guarantor was leaving the partnership forcing us to refinance the entire loan. Additionally, 504 commercial first loans are tougher to finance in our credit market where the lenders of these commercial loans are seeking simple higher quality transactions. Furthermore, SBA debenture has certain limitations and one cannot always structure the required business changes within the 504 framework.

2) SBA 7a refinance can be used in partner buyouts: SBA can be used to finance partner buyout if those partners completely leave the partnership and the remaining partner has sufficient equity in the project.

3) Transfer of more than 51% of ownership translates into a franchise re-licensing: For those whose title is not structured under a single entity, such as ownerships under tenants in common, a change in ownership of 51% or more triggers a relicensing of the franchise agreement. It is always a preferred strategy to have the hotel titled under a single entity and manage the details of the partnerships in the operating agreement or the bylaws.

4) Payoff of 504 SBA debentures: These loans can only be paid off on the third Thursday of each month. Planning is crucial in refinancing 504 loans.