Five Questions With: Henry A. ‘Bud’ Violet

Henry A. “Bud” Violet is president of the Providence-based Ocean State Business Development Authority. / COURTESY OCEAN STATE BUSINESS DEVELOPMENT AUTHORITY
Henry A. “Bud” Violet is president of the Providence-based Ocean State Business Development Authority. / COURTESY OCEAN STATE BUSINESS DEVELOPMENT AUTHORITY

Henry A. “Bud” Violet is president of the Providence-based Ocean State Business Development Authority. He talks with Providence Business News about a new 504 refinancing program approved by the U.S. Small Business Administration last month.
PBN: Can you tell our readers a little bit about this new permanent 504 refinance program?
VIOLET:
SBA 504 debt refinancing loans are the only loans available to businesses because of the government guaranty that precipitates a 20-year low interest “below market” fixed-rate second mortgage. The debt being refinanced must have been incurred to acquire land, construct a building or to purchase equipment, and the assets need to be eligible for financing consistent with the 504 program. Cost essential to the refinancing such as prepayment penalties, financing fees or other refinancing cost may be included in the debt refinance portion of the project.
PBN: Who can qualify for this program?
VIOLET:
The existing debt must be collateralized by fixed assets. The borrower must be current on all payments due on the existing debt for not less than one year preceding the date of application. The 504 refinance program allows a business to refinance and expand as long as the debt to be refinanced does not exceed 50 percent of the projected expansion cost. (In other words, it needs to be a large expansion because the current debt cannot be more than half of what the business is spending on the expansion. For example, if a business currently owes $1,000,000 on a commercial property, the expansion cost would have to be $2,000,000 to qualify for a 504 refinance. The debt being refinanced does not need to be for assets at the same location or for the same type of property as the project being financed as long as the operation at the other location has the same NAICS code as the operation at the project location.
PBN: Can businesses with existing government-backed loans refinance through the program? Why or why not?
VIOLET:
Businesses that have secured existing government backed loans do not qualify for SBA 504 refinancing, but it may be possible to get an additional 504 loan for an expansion.
PBN: Why should businesses considering applying?
VIOLET:
The SBA 504 refinancing program gives the borrower the advantage of having a fixed rate for the entire life of the loan (10/20 years). This is important because it hedges the borrower from any interest rate risk associated with a conventional bank loan. Interest rate risk is inherent from the interest rate environmental that exist today, and can provide a fair amount of uncertainty for small and large business owners. This is the case with adjustable rates and ballooning loans. Thus, the 504 refinancing will give business owners peace of mind, so that they can plan their future cash flows.
PBN: Why should businesses consider working with OSBDA?
VIOLET:
Ocean State Business Development Authority is the oldest and only Rhode Island-based Certified Development Corporation in the nation, having received its certification from SBA in January of 1981 and prior to that was operating as a Local Development Company in 1978 administering the SBA 502 program. We have a complete apprehension of all government-backed guaranty programs such as SBA 7a and USDA as well as our flagship 504. We consult daily with business concerns both large and small seeking financing and are recognized as having a best effort can-do attitude to complete a transaction along with the cost-effectiveness of our services.

No posts to display