504 Q & A
Discovering details of 504 Refinance
On a cash out project: my understanding is that when the loan closes the bank fully disperses the cash out money for items that the borrower has identified during the application (and were approved by SBA as eligible use of funds), and we can immediately begin the debenture funding process (i.e. we don’t have to wait for those costs to come to fruition, like we do with a construction project). Do I have that correct?
Correct. The borrower does need to keep records of the 'cash out' expenses but there is no need to wait to disburse those funds.
Does the rule about no changes of ownership in the last 2 years apply to a complete change in ownership, or does this include any and all changes. Example: Client wants to refinance, has over a two year loan history, but had previously bought out a minority owner within 2 years of application.
Any (no matter how minor) changes will affect this policy. In your example, the applicant will need to wait 2 years before utilizing this program.
I seem to recall that the past refinance program did not have a “special purpose” requirement and all loans were allowed to have a 10% injection (if qualified otherwise under the refinance rules). Is this the case, or will Special Purpose properties require an additional 5%?
A: Special Use properties require an additional 5% equity contribution and also requires the 1st party lienholder to lend at least 50% of the eligible project costs.