The SBA wants to put some extra money in your pockets. To do so they’ve implemented a temporary program to help small businesses refinance commercial loans and restructure their debt. The SBA recently expanded the program and increased eligibility so that more people can take advantage of it before the program ends in September 2012.

The 504 Loan Refinancing Program—implemented under the Small Business Jobs Act of 2010—allows small businesses to refinance not only existing debt but use excess equity to obtain working capital that can be used to finance eligible business expenses, explains Steve Smits, associate administrator for the Office of Capital Access at SBA.

Some such expenses are utilities, insurance, and salaries. Though the SBA site simply states: "Any expense directly related to business operations." It’s hoped the expansion will alleviate financial stresses while both protecting and creating jobs.

The temporary refinancing program is intended to aid the large number of small businesses that are expected to have their loans mature. Now a third-party lender only needs to match or exceed the amount provided by the SBA, instead of 50 percent of the project. Also borrowers are now able to finance the appraised value of available collateral (including applicable fixed assets) up to 90 percent. 

It seems as though this opportunity to refinance comes at a good time. "Right now the commercial market—at least nationally-speaking—is undergoing a stabilization trend," says George Ratiu, an economist for the National Association of Realtors. The demand for real estate space in the core property types: office, industrial, retail, and the apartment sector has stabilized and is turning positive, a relief since demand has been negative for the past three years.

The problem is that people are just unaware of this help from the SBA program. Several states have yet to take full advantage of the refinancing program. As of early November, 11 states had only one approved loan, 10 had not yet tapped into the program, and the average number of approved loans across the nation was nine.

This may seem surprising, given the SBA’s high expectations for the program, which ends September 27, 2012. According to the SBA, “As many as 8,000 businesses may participate in this program during the current fiscal year, which will provide up to $7.5 billion in SBA-guaranteed financing leading to total project financing of almost $17 billion.” Despite high hopes, as of early November only 365 loans had been approved in 40 states since application acceptance starting Feb. 28.

The low number also raises concerns about the money actually available for the program, as it’s completely funded through additional fees gathered from refinancing activities. It seems that many who could be benefiting from the program aren’t, possibly due to the restrictive nature of prior guidelines. But a look at the market shows no lack of need.

According to Ratiu, properties in the lower evaluation spectrum and inland geographies have been struggling with financing, prices, and capital availability, even through the recovery period. "Financing is still the No. 1 concern for commercial space in these markets," he says. Businesses in these areas may very well benefit from the SBA program. Since the program was expanded in October, interest has at least increased. Inquiries into the refinancing program (from lenders) has gone from about four to over 45 a day in the processing centers.

Some entrepreneurs aware of the program don't think it goes far enough to help struggling small businesses. Chris Hurn is one of those small business owners. He’s also the CEO and co-founder of Mercantile Capital Corporation, a commercial real estate lender, giving him a unique perspective on the matter. He thinks the program isn’t an absolute solution, but a step in the right direction—albeit a baby step. “It’s not the silver bullet we’ve all been looking for,” he says, “but it will certainly help a fair amount of small business owners out there to tap that embedded equity and use it for purposes that the business needs right now.”

He also sees ways the program could be improved.

Short of making it a permanent offer, Hurn thinks more businesses would benefit from the temporary program if it were extended until the funds are utilized. “They wrote the regulations so restrictively that it wasn’t until Oct. 12 that the program was actually able to do fully what it needed to do per the law,” he says. He wants the sunset lifted to maximize the opportunity: “Don’t penalize the small business guy. Give him a chance.”