The U.S. Small Business Administration (SBA) announced Thursday that it will make up to $15 billion available through a new, temporary loan program over the next two years. The loans are designed to assist small businesses facing balloon payments or maturing commercial mortgages before Dec. 31, 2012.

“The economic downturn of recent years and the declining value of real estate have had a significant, negative impact on many small businesses with mortgages maturing within the next few years,” SBA Administrator Karen Mills said in a press release. “As a result, even small businesses that are performing well and making their payments on time could face foreclosure because of the difficulties they face in refinancing and restructuring their mortgage debt.”  

Borrowers will be able to refinance up to 90 percent of the current appraised property value or 100 percent of the outstanding mortgage, whichever is lower, plus eligible refinancing costs. Loan proceeds may not be used for other business expenses, and existing 504 projects and government-guaranteed loans are not eligible to be refinanced.

The 504 loan program provides long-term, fixed-rate financing to acquire major fixed assets, such as buildings or equipment, for expansion or modernization.

Joe Folsom, SBA district director for Iowa, said he expects a strong level of interest in the program in the state.

“I think it’s going to be an excellent tool for businesses to be able to structure real estate loans properly,” Folsom said. “We could restructure those out to a 20-year term, and that would give them additional breathing room and provide them with more working capital, particularly if the existing lenders aren’t able to restructure them in a way that would enable them to be successful.”

The SBA will begin accepting applications Feb. 28 for the refinancing program, which is expected to benefit as many as 20,000 businesses. The loans will be structured like traditional 504 loans, with borrowers committing at least 10 percent equity and working with third-party lending institutions and SBA-approved certified development companies. A key feature of the new program is that it does not require an expansion of the business to qualify.  

Additional fees to borrowers are expected to cover the costs of the program, which was authorized under the Small Business Jobs Act.

SBA officials said the agency may later extend the program to businesses with balloon payments due after December 2012, as well as other businesses that can otherwise demonstrate a strong need for refinancing.