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May 25, 2016

SBA Releases 504 Refinancing Rules

Based on the SBA 504 related provisions in the 2016 Omnibus Budget Bill passed by Congress and signed into law in December of 2015, the SBA today published regulations which are essentially the rules by which 504 refinancing will operate. This is a terrific development and the SBA met its goal of having the regulations issued before June 1st. The main aspects of the new program are as follows:

  • The legislation and new rules make this program permanent provided the program continues to operate at no cost to the taxpayers, as it has in the past.
  • To be eligible for refinancing the loans must be for owner-occupied business properties just like regular 504 program loans.
  • Loans eligible for refinancing must have been in existence for at least the last two years and must have been current for at least the last 12 months as of the date of loan application.
  • To be eligible, the applicant-company must have had no ownership changes in the last 2 yrs.
  • Each refinancing project must meet either the 504 program’s existing job creation and retention goals, or alternatively meet at least one of the public policy or community development goals of the program, just like the regular 504 program.
  • Like the successful pilot 504 refinancing program that operated in 2012, the program will allow proceeds to be used for business expenses, done in conjunction with eligible business mortgage refinancing.
  • The maximum loan-to-value on the refinancing-only projects is 90%. For refinancing projects with proceeds for business expenses, the maximum loan-to-value is 75%.
  • SBA 504 refinancing may only be used to refinance conventional financing. This means that existing SBA loans or other types of federally direct or federally guaranteed financing is not eligible for this program.
  • The interest rate on a 504 refinancing will be almost identical to existing 504 rates. Technically, 504 refinance rates will be .044% (about 1/20th%) higher than regular 504 rates.


The reinstatement of 504 refinancing will allow many small and mid-sized companies to exit loans with unfavorable terms and lock in near historic low interest rates. This will save many companies thousands of dollars each month, and these savings can be used help these companies expand and to create and retain significant numbers of local jobs. We congratulate SBA on a job well done on the implementation of this new aspect of SBA 504 financing.



Lixit visit

US SBA Administrator Maria Contreras-Sweet recently visited our client, Lixit Corporation, in Napa.

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