Refinance and Consolidate Debts with SBA Hotel Loan of over 5 million in Texas
With the refinance project starting in September of 2013, a year long endeavor marked the most challenging transaction for the Scientific Capital. It required re-structuring of the financials, the corporate structure, and other advisory actions to stage the project for the refinancing.
Like many hotelliers who went through extraordinary circumstances in 2009 to 2012 timeframe, the SBA 504 deferments obtained were having a serious burden on this client. Those deferments are to be paid on top of the two 504 loans within five years increasing the monthly payment significantly. Many Texas hoteliers have paid their property tax by borrowing from the TaxEase Corporation in the tough economy of the past few years. Since these loans are shorter term and have higher interest rate, it further burdens the cash flow of the hotels. Consolidation of these loans to into one with lower interest rate and a twenty five year amortization surely lightens the cash flow constraints.
Another twist with the SBA loans is that refiannce of an existing 504 loan with a 7a requires GP approval which means that the SBA has to underwrite and approve the loan. In many cases these loans are declined. Only with the expertise and the knowledge of the Scientific Capital, the decline decision in this case was reversed when Scientific Capital was able to appeal the SBA’s negative decision and argue the borrower’s qualification by referring to specific SBA rules in the Operating Procedures guide.
This project was originally structured as Pari Passu in which SBA 7a of 5 million and a commercial loan of 100,000 were structured in the first position to reach the required 5.1MM level, but later with the drop in the loan balances a standard 7a loan at 5 million was sufficient to pay off all debts. In many projects, Scientific Capital is able to structure the debts as Pari Passu to reach higher loan amounts in excess of the 5 million SBA allocation.
In this project the borrower was able to consolidate both SBA 504 loans, all SBA deferment loans, all business lines of credit, minor hotel PIP improvement costs, and the TaxEase notes.
Thanks to Ramin we have formed a partnership with him that will continue to thrive now and well into the future!