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.

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

July 2018

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