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SBA 504 Debt Refinance Program Explained | 504 Capital Corporation

SBA 504 Debt Refinance Program Explained

Debt Refinancing etched in between a dollar note

SBA 504 Debt Refinance Program Explained

The 504 Loan Program, an initiative of the Small Business Administration(SBA), provides long-term financing to small businesses for the purchase or improvement of land, buildings, and major equipment. 504 loans support the creation and retention of jobs in support of local economic development and are administered through Certified Development Companies (CDCs) regulated by the SBA.

The 504 Loan Program can also help entrepreneurs refinance debt, both for projects that involve the expansion of a small business and those that do not. “Expansion” refers to either the acquisition of land, or new construction/improvement of existing buildings, land, or equipment for use by the borrower.

In late July of 2021, the SBA published a revised version of its 504 Debt Refinance Program, as authorized under Section 328 of the Economic Aid Act, which includes updates to debt refinancing both with and without expansion. The updated regulations significantly expand the scope of 504-debt refinancing programs to help small business recovery and growth.

504 Debt Refinancing Chart

A major benefit of the SBA 504 Loan Program is that it has allowed small business owners to refinance not only their commercial mortgages but also any other business debts they carry. This government-backed financing has several big advantages.

  • Up to 90% financing at a fixed interest rate for up to 25 years.
  • Down payments as low as 10%, which often can be satisfied by existing project equity.
  • A cash-out option of up to 85% for eligible business expenses, including rent, repairs, salaries, maintenance, and lines of credit. Expenses cannot exceed 20% of the appraised value.
  • Existing government-guaranteed debt is now eligible.

How Can You Know If Your Project Qualifies For Debt Refinancing?

  • You have used at least 85% of the original loan to acquire, construct, or improve fixed assets.
  • You have been in business for 2 years prior to submitting an application.
  • Your debt was incurred no less than 6 months before applying for refinancing.
  • You can provide an independent appraisal of your project’s assets as collateral prior to closing, dated no earlier than 1 year from approval.
  • Your business occupies at least 51% of the total square footage of your property.

If you’re looking for one of the top SBA 504 lenders in Virginia, Maryland, and North Carolina, get in touch with 504 Capital Corporation. We are a certified SBA CDC loan provider, assisting small business owners, banks, credit unions, and commercial lending companies with obtaining the funds they need to make their businesses attain new heights.

In the thirty years that we’ve been in business, we’ve loaned more than $350 million, at competitively low interest rates to small business owners so that they can purchase the land, property, and heavy equipment they need to expand and prosper. Contact us today to learn more and set up an appointment or click here.

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