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SBA 504 Refinance Rules in Kansas: What You Need to Know
As a business owner in Kansas, you know the importance of having access to financing to grow and sustain your business. However, there may come a time when you need to refinance your existing debt to improve your cash flow or take advantage of lower interest rates. This is where the Small Business Administration’s 504 loan program comes in. In this blog post, we will discuss the SBA 504 refinance rules in Kansas and how they can benefit your business.
- SBA 504 Refinance Rules in Kansas: What You Need to Know
- The Story of a Kansas Business Owner
- What is the SBA 504 Loan Program?
- SBA 504 Refinance Rules in Kansas
- How Long Does Approval Take?
- Common Mistakes Kansas Business Owners Make
- Real Case Study: A Kansas Business’s Success with the 504 Refinance Loan
- Frequently Asked Questions
- Get Started with GHC Funding
The Story of a Kansas Business Owner
Let’s start with a real-life story of a Kansas business owner, John, who owns a successful manufacturing company in Wichita. John’s business has been growing steadily over the past few years, and he recently decided to expand his operations by purchasing a new warehouse. However, he didn’t have enough cash on hand to fund the purchase and needed to take out a loan.
John had been in business for over 10 years and had a good credit score, so he assumed getting a loan would be easy. However, to his surprise, he was turned down by several banks due to his high debt-to-income ratio. This was a major setback for John, as he didn’t want to miss out on the opportunity to expand his business.
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That’s when John heard about the SBA 504 loan program, which allows business owners to refinance their existing debt and unlock the equity in their assets. He contacted GHC Funding, a certified SBA lender in Kansas, and was able to secure a 504 refinance loan with favorable terms. This not only helped him purchase the new warehouse but also improved his cash flow by reducing his monthly payments.
What is the SBA 504 Loan Program?
The SBA 504 loan program is a financing option for small businesses that provides long-term, fixed-rate loans for the purchase of fixed assets, such as real estate or machinery. It is a collaborative effort between the SBA, Certified Development Companies (CDCs), and private lenders. The SBA guarantees 40% of the loan, the CDC provides 40%, and the borrower contributes the remaining 20% as a down payment.
One of the major benefits of the 504 loan program is that it has a lower down payment requirement compared to traditional loans. This makes it a viable option for businesses that may not have enough cash on hand to make a large down payment.
SBA 504 Refinance Rules in Kansas
The SBA 504 refinance rules in Kansas are similar to those in other states. However, there are some specific requirements that businesses must meet to be eligible for the program. These include:
- Credit score requirements: The SBA does not have a minimum credit score requirement for the 504 loan program. However, most lenders will look for a credit score of at least 680 for the business and its owners.
- Eligible debt: The debt being refinanced must be related to a fixed asset, such as real estate or equipment, and must have been incurred at least two years before the loan application.
- Occupancy requirement: For the debt to be eligible for refinancing, the business must occupy at least 51% of the property being refinanced.
- Cash flow requirement: The business must have sufficient cash flow to cover the new loan payments.
How Long Does Approval Take?
The approval process for an SBA 504 refinance loan can take anywhere from 30 to 90 days, depending on the complexity of the loan. However, working with a certified SBA lender like GHC Funding can expedite the process and ensure a smooth and timely approval.
Common Mistakes Kansas Business Owners Make
When applying for an SBA 504 refinance loan, it’s important to avoid these common mistakes that Kansas business owners make:
- Not understanding the eligibility requirements: As mentioned earlier, there are specific eligibility requirements for the 504 loan program, and it’s crucial to understand them before applying.
- Not working with a certified SBA lender: Working with a lender who is not familiar with the 504 loan program can result in delays and a less favorable outcome.
- Not having a solid business plan: Lenders want to see a business plan that outlines how the loan will be used and how it will benefit the business. Not having a clear plan can hurt your chances of getting approved.
- Not having accurate financial records: Lenders will require detailed financial records, including tax returns and profit and loss statements, to assess your business’s financial health. Make sure these records are accurate and up to date.
Real Case Study: A Kansas Business’s Success with the 504 Refinance Loan
Let’s take a look at a real-life example of a Kansas business that benefited from the SBA 504 refinance loan.
ABC Manufacturing is a family-owned business in Overland Park that produces custom-made metal parts for various industries. The business had been struggling to keep up with their loan payments, which were eating into their cash flow and affecting their ability to grow. They heard about the 504 refinance loan and decided to apply for it to help improve their financial situation.
Their existing loan had a balance of 0,000, and they were paying an interest rate of 8%. With the 504 refinance loan, they were able to secure a new loan with a balance of $600,000 at an interest rate of 5%. This not only helped them lower their monthly payments but also gave them extra working capital to invest in new equipment. As a result, ABC Manufacturing was able to increase their production and take on more clients, leading to a significant increase in revenue. They were also able to save $12,000 annually on interest payments.
Frequently Asked Questions
Here are some commonly asked questions about SBA 504 refinance rules in Kansas:
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- Q: Can I use the 504 refinance loan to pay off credit card debt or other unsecured debts?
A: No. The loan must be used to refinance debt related to a fixed asset, such as real estate or equipment.
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- Q: Can I use the loan to expand my business?
A: No, the loan can only be used to refinance existing debt. However, by freeing up cash flow, businesses can use the extra funds to invest in growth opportunities.
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- Q: What is the maximum loan amount for an SBA 504 refinance loan?
A: The maximum loan amount is million or .5 million for manufacturing businesses.
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- Q: Can I apply for an SBA 504 refinance loan if I already have an existing SBA loan?
A: Yes, if the existing loan does not exceed million and the new loan will still meet the 504 program’s eligibility requirements.
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- Q: How can I find a certified SBA lender in Kansas?
A: You can search for certified SBA lenders on the SBA’s website or contact GHC Funding for assistance.
Get Started with GHC Funding
If you’re a Kansas business owner looking to refinance your existing debt, consider the SBA 504 loan program. At GHC Funding, we are dedicated to helping small businesses in Kansas access the financing they need to grow and thrive. Contact us today to learn more about the 504 refinance rules in Kansas and how we can help your business.
Don’t let high debt payments hold your business back. Take advantage of the SBA 504 refinance loan and unlock your business’s potential.
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