SBA 504 Debt Refinancing

The SBA 504 loan program offers an attractive refinancing program for real estate and equipment loans. Borrowers may qualify for up to 90% financing on real estate and equipment with cash out (funds over and above the loan balances to be refinanced) that can be used for other business expenses.  See the qualifying criteria below and contact a BLP professional to discuss your eligibility for the program.

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Eligibility Questions:

All Questions must be answered “Yes” to qualify for the SBA Debt Refinancing program.

  • Was the debt to be refinanced incurred more than two (2) years ago?
  • Has the business been in operation for at least two years?
  • Has the loan been current for the past year with no payments having been deferred or over 30 days past due?
  • Was at least 85% of the debt being refinanced used for 504 eligible purposes (i.e. commercial real estate and equipment)?
  • Does the small business in question employ one FTE (full-time equivalent) for every $65,000 of SBA financing that is being applied for (or meet a public policy goal – BLP can assist in identifying a qualifying goal)?
  • Does the business currently occupy at least 51% of the real estate being refinanced?


Financing Structure:
  • The amount of total financing cannot exceed 90% of the fair market value of the building(s) and/or equipment securing the loan, or the outstanding principal balance of the debt being refinanced, whichever is lower. Additional collateral can be pledged to supplement shortfall on building(s) and/or equipment being refinanced.
  • If there is equity in the building(s) and/or equipment used to secure the debt, Borrower can take cash out to use for business purposes. Possible uses include 1) paying down lines of credit; 2) expenses incurred before loan approval that is unpaid; and 3) expenses planned for the next 18 months (i.e. salaries, utilities, and inventory).
  • Participating Bank loan amount must be at least the same as the SBA 504 loan amount.
  • Borrower contribution must be at least 10% of the appraised value of the collateral securing the loan (can include non-business assets).
  • The borrower’s contribution could be satisfied through its equity in the collateral being offered to the SBA.
  • Building(s) and/or equipment being refinanced must be appraised before closing (within one year of loan approval).

Example Case Study

The Request -

  • Building appraises at $1 million.
  • Business has a $400,000 mortgage to Refi.
  • Business would like to include eligible operating expenses.         

Structure -

  • Typically, financing cannot exceed 90% LTV but with operating expenses included this example it is limited to 85% LTV or $850,000.
  • Mortgage can be refinanced at the $400,000
  • The maximum amount of business expenses that can be financed is 25% LTV or $250,000.
  • Total eligible financing is $650,000 financed by bank and SBA at $325,000 each.

Additional Program Regulations:
  • No refinancing of existing SBA 504 projects, SBA 7(a) loans, USDA loans, or any other loans with a federal guarantee.
  • No refinancing where the creditor is in a position to sustain a loss and refinancing would cause a shift to SBA of all or a portion of that potential loss.
  • The program is strictly for debt refinancing and cannot involve an expansion of the small business: no acquisition, construction or improvements that would change the footprint of the building. Upgrades/renovations to an existing facility without altering the footprint of the building may be included. Note: There is a ‘partial refi’ SBA 504 program where these situations may be appropriate.
  • The debt being refinanced may consist of one or more commercial loans.

Other Benefits
  •  As long as financing requests include ‘Qualified Debt’ it can also include other secured debt under specific guidelines.

  • The financing request can include funds for eligible business expenses either already expended or planned in the next 18 months.  Qualified business expenses include but are not limited to salaries, rent, utilities, and inventory.

Refinance With or Without Expansion

Were you aware that the SBA 504 program has two different refinance products- with (no cash out) and without (cash out) expansion? In both cases the debt being refinanced must have originally been used for an eligible SBA use, building or equipment purchase and the borrower can tap into the assets' equity for the loans required equity injection. If you have a prospect that is interested in refinancing there fixed asset give one of our Credit Analysts a call to discuss how a 504 loan can assist them.

Debt Refi w/o Expansion
(Cash out for operating expenses)
Debt Refi with Expansion
(No cash out for operating expenses. Projects for building expansions)
Max Borrower contribution required 15%, unless SBA determines risk mitigation requires more
Max Borrower contribution required 20%
Federally guaranteed loans ineligible (SBA 7a, USDA, etc.)
Federally guaranteed loans eligible if allowed by originating Federal Agency (existing 7a loans are eligible for refinance).
Financial Institution (TPL) first mortgage loan can be reduced to less than 50% of project cost provided:
1)      the TPL loan is equal to or greater than the SBA loan, AND
2)      SBA not to exceed 40% of the total project cost or 35% for Special Use properties
TPL loan must be at least equal to 50% of Project costs
SBA not to exceed 40% of the total project cost or 35% for Special Use properties
Subject to supplemental annual fee. Current total annual fee is 0.682% included into the borrower's final blended interest rate.
No supplemental annual fee. Current total annual fee is 0.642%
"Eligible Business Expenses" up to 20% of appraised value of the Eligible Fixed Assets w/max LTV of 85%. Collateral must be fixed assets securing the Qualified Debt. No additional collateral can be added to meet LTV requirements.
No "cash out". Costs such as prepayment penalties, financing fees or other refi costs required by original debt instrument may be included.
Min. 2 year requirement: Age of original eligible debt, time debt secured by the same Eligible Fixed Asset & time applicant in business
"Substantial benefit" test - must provide better rates or terms - 10% lower payment. This is typically met with a reamortization of the debt being refinanced.
Borrower must be current on all payments for preceding year as of date of app. Loan may have been modified/refinanced within the year if no additional funds disbursed and if purpose was to extend maturity date.
Borrower must be current on all payments due on the existing debt for not less than 1 year or for the time the debt has been open if less than 1 year. No allowance for modification or refinance to extend maturity date.

Need More Information?

The Business Lending Partners staff will gladly address your questions on refinancing regulations.  For more details, please contact:

Carolyn Engel

(262) 898-7420


SBA 504

May 2019

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20-Year Fixed Rate:


10-Year Fixed Rate: