With banks facing even greater scrutiny and tightening their lending, the U.S. Chamber is calling on Congress to pass a bill to allow small businesses to refinance certain commercial real estate loans through the Small Business Administration.

Currently, SBA 504 loans are set aside only for “business expansion.” They are long-term, fixed-rate loans for equipment and owner-occupied real estate but are contingent on new jobs being created from the expansion. The Chamber is seeking to change the law so that 504 loans can be used to refinance conventional commercial real estate loans that are coming due.

An alarming number of commercial real estate loans with 15-to-20 year amortization terms that are renewed every 3-to-5 years are coming due at a time when borrower’s assets have devalued, according to the Chamber’s Executive Vice President of Government Affairs Bruce Josten. “Even though the small business borrower may be current on the payments, the financial institution with tightened lending standards and increased oversight by examiners may not have a choice but to either force the business into foreclosure or take a loss by writing down the loan,” Josten says.

Rep. Melissa Bean (D-IL) has introduced legislation that would allow small businesses to refinance their commercial real estate loans with a 504 loan, at no expense to tax payers. The bill would also raise the maximum SBA 504 loan size from $1.5 million to $5 million and from $4 million to $5.5 million for small manufacturers. The legislation would require that borrowers be current on payments and that refinance loans apply only to owner-occupied commercial real estate, buildings, or equipment.

The idea has the support of the Obama Administration. “Healthy small businesses shouldn’t be forced to close their doors just because they can’t find refinancing. We can help them avoid foreclosure and continue creating jobs by temporarily opening up SBA’s 504 program,” SBA Administrator Karen Mills said during a National Small Business Week speech in Washington DC on May 24, 2010.