Washington, D.C.– Small businesses facing maturity of commercial mortgages or balloon payments before Dec. 31, 2012, may be able to refinance their mortgage debt with a Small Business Administration (SBA) loan through a new program that begins Monday, Feb. 28.The program, authorized under the Small Business Jobs Act, will be in effect through Sept. 27, 2012.

The new loan program is structured similarly to a traditional SBA504loan, which is offered to businesses that want to expand. In both cases, features include:

• A loan secured from a private sector lender with a senior lien covering up to 50 percent of the project cost
• A loan secured from a Certified Development Company – a private, nonprofit corporation which is set up to contribute to economic development – with a junior lien covering up to 40 percent of the project cost
• A contribution from the borrower of at least 10 percent of the project cost

The main difference is that the new program does not require an expansion of the applying business in order to qualify. This allows businesses to continue operations if they are able to make payments, even if they are not looking to expand in the current economy.

“This is an excellent way for businesses who contribute to their communities, create jobs, and pay their bills on time to keep doing what they’re doing,” said Rep. Raúl M. Grijalva of the new program. “The federal government is right to step in and offer this assistance to small businesses everywhere, and Southern Arizona should take advantage of this opportunity as widely as possible.”

The economic downturn has meant a consistent decline in real estate values across Arizona and most of the country. As a result, some small businesses that perform well and make timely mortgage payments still face foreclosure because of the difficulties of financing debt. The new SBA program is meant to help successful small businesses remain viable and protect jobs.

The SBA has decided to open the program first to businesses with immediate need due to impending balloon payments before Dec. 31, 2012. The agency has said it will revisit the program later and may open it to businesses with balloon payments due after that date or those that can demonstrate strong need in other ways. 

Congress authorized SBA to approve up to $7.5 billion in loans in fiscal year 2011, the current fiscal year, and another $7.5 billion in fiscal year 2012.