Skip to main

SBA 504 Refinance Program

Share this page:

Refinance WIth Expansion

  • Subject to the same rules as standard 504 projects
  • Amount of debt eligible for refinance is now up to 100% of the expansion costs.
  • Borrower must have been current within 30 days for the last 12 payments
  • Costs such as prepayment penalties, financing fees, or other refi costs required by the original debt instrument may be included in refinance.
  • The refinancing of existing SBA or government guaranteed debt is allowed

Refinance Projects Without Expansion

  • Borrower must have been in business and operating for two years
  • Note must be at least 6 months old and 85% of original proceeds used to purchase eligible 504 assets
  • Equity is based on a current appraisal of the assets being refinanced
  • Businesses may use extra equity for the financing of other eligible business expenses up to 20% of the appraised value
  • Examples of eligible business expenses (EBE) include utility bills, rent, salaries, inventory, and credit card debt (if the card is in the name of the business and used for business purposes only)
  • Businesses may use SBA 504 refinance loan to repay an existing government guaranteed loan (including SBA/USDA, etc.).

Refinance of Existing Government Guaranteed Debt is Eligible Under Certain Conditions

  • An existing 504 loan if both the Third-Party Loan and the 504 loan are being refinanced or the Third-Party Loan has been paid in full.
  • For an existing 7(a) loan, the CDC must verify in writing that the present lender is either unwilling or unable to modify the current payment schedule.
  • In the case of same institution debt, if the Third-Party lender or the CDC affiliate is the 7(a) lender, the loan will be eligible for 504 refinancing only if the lender is unable to modify the terms of the existing loan because a secondary market investor will not agree to modified terms.
  • The new project must reduce the payment amount by 10%.
  • The refinancing of any federally guaranteed debt provides a “substantial benefit” to the borrower after eligible business expenses, prepayment penalties, financing fees, and other financing costs are accounted for.
  • In calculating the percentage reduction in the new installment payment, prepayment penalties, financing fees, and other financing costs, must be added to the amount being refinanced, but not eligible business expenses.

Benefits For Lenders

  • 1st lien position and low loan-to-value strengthens private lender’s loan portfolio
  • Fixed interest rate helps lenders compete for more business
  • Locks in long-term relationship with the borrower and frees up available debt

Benefits for Borrowers

  • Financing available up to 90% of the appraised value of the property being refinanced at a long-term, fixed-rate
  • Equity contribution can be as little as 10% of the property’s value.