Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Sep 6, 2012

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The 504 loan refinancing program, ran by the Small Business Administration (SBA), is expiring at the end of this month. Launched in Feb. 2011, the 504 loan refinancing program was created to offer SBA loans with the intention of spurring economic growth and to help small businesses recover from the recession.

The program receives most of its funding from fees assessed for refinancing projects. A requirement within the program calls for a commercial loan borrower to pay 10 percent of the SBA loan while the borrower’s lender and the SBA divide the remainder. These SBA loans carry low interest which has allowed borrowers to maintain more positive cash flow.

Micah Palmer, a businessman in the recycling industry, sought to expand his business and improve his line of credit by borrowing one of the program’s SBA loans. He applied in the spring of 2011 and was approved the following winter for a 20-year refinance business loan which allowed him to hire five additional employees. Palmer was also able to save two existing positions and expand his 15-employee business.

“It was a good option for us,” said Palmer in an interview with the Omaha World-Herald.

Unfortunately, the option that brought such excellent opportunity and good fortune to Palmer is set to evaporate in less than one month’s time.

A proposed renewal for the 504 refinancing program has been pitched, but it is currently stalled in Congress. The program expires on Sept. 27, leaving only days for interested small business owners to submit last-minute applications for these government-backed commercial loans.

The 504 refinance program was created through the Small Business Jobs and Credit Act of September 2010. Originally, the program was intended to give small businesses a way to refinance existing debt—namely, leases for property like offices, factories, warehouses and equipment. However, adjustments were made in Oct. 2011, and the program began permitting small businesses to refinance cost-of-business expenses, such as employee salaries, utility expenses, inventory costs and insurance bills.

Michael Foutch, a business development specialist at the SBA’s Nebraska District Office in Omaha, Nebraska, said that the SBA loans offered through the 504 refinancing program have helped a myriad of businesses, among which include warehouses, child care service providers, hotels, restaurants, retail stores, car dealerships and contractors.

“Small businesses are creating more than 500 new jobs in Nebraska, and keeping nearly 1,500 jobs in the state,” said Foutch in an interview with the Omaha World-Herald.

Through the 504 refinancing program, the SBA has lent a total of $50 billion which have created more than 2 million jobs across the country. In Nebraska alone, 66 SBA loans valued at $40.2 million lent through the 504 program have been approved for 18 small businesses.

“I’ve never seen anything else like this before. When this goes away, it’s a one-time deal. You better take advantage of it,” said Leon Milobar, the district director of the U.S. Small Business Administration in Omaha, to the Omaha World-Herald.

Currently, the program permits small business owners to borrow up to 90 percent of the appraised value of offered collateral or the full value of outstanding mortgages depending on which is lower. To ensure an applying borrower receives a long-term and low-interest fixed rate, banks are required to lend an amount that is equal to or larger than the SBA’s contribution, which is based upon a borrower’s financial information and offered collateral.

“We see a tremendous success rate when people utilize this loan program because there’s assets involved and it’s over a long period of time,” said Milobar.

Clark Ruby, the chief financial officer of a child day program company called Behaven Kids, saw the merits of SBA loans. Burdened with the weight of high monthly payments, Ruby chose to consolidate two existing debts into one in order to lower his monthly payments. Ruby used equity to divide the startup costs for a new child center in Elkhorn.

Nicole and Brian Neesen, the owners of Granite Transformations for Kitchens and Baths, praise the SBA loan program for lowering their monthly payments from $11,000 to $7,500 for the building they lease. The decrease in monthly payments resulted in the Neesens expanding their operations to another city and hiring on additional staff members amid the recession.

The Neesens advise interested business loan applicants to not be discouraged by the SBA loan application process, especially with the expiration date fast approaching.

“Don’t allow it to intimidate you so much that you don’t take advantage of this great opportunity,” Nicole Neesen told the Omaha World-Herald.