SBA 504 Refinancing: A Growth Strategy for Small Business

Purchasing commercial property is a goal for many small businesses, but they often find themselves settling for loans with high or adjustable rates. What was intended to be a wise investment for the future becomes a financial burden, and that holds the business back instead of propelling it forward.

The Advantages of 504 Refinancing

SBA 504 refinancing is designed to help you get out from under less-than-optimal terms by refinancing up to 100% of your existing commercial real estate debt. Like traditional SBA 504 funding, this program offers below market fixed rates with terms of 10, 20, and 25 years. Leveraging the SBA 504 refinance program offers several advantages, including the ability to:

  • Reduce your monthly occupancy costs for the long term
  • Cash out up to 20% of your property‚Äôs value for working capital
  • Refinance an existing SBA 504 or 7a loan

Your qualified debt can include more than one loan as long as it satisfies these requirements. It can also include business expenses such as salaries, rent, utilities, inventory, and other eligible non-capital expenditures. Pulling these items into a single, low rate loan can simplify your financial picture and give you the breathing room you need to confidently grow your business.

A Solid Structure for Your Future

As with traditional SBA 504 loans, SBA 504 refinancing is typically structured with 50% coming from a bank loan, 40% from the SBA, and 10% from borrower equity. In order to qualify, at least 75% of the original loan must have been used to acquire, construct, or improve land, building, machinery, or equipment used by your business. The original loan must also be:

  • In place for at least six months
  • Current on all payments due for at least twelve months
  • Secured by the subject property

Refinance projects that include qualified debt only have a maximum loan to value (LTV) of 90%. For projects made up of qualified debt and cash out for eligible business expenses, the LTV is 85%. We have assisted numerous clients who believed they were stuck with high rate loans. By leveraging well-structured debt provided through this program, they lowered their monthly payments and found a clear path to sustainable growth.

To learn more about the SBA 504 refinancing program, please contact our team. The rate for this program changes every month and you can get the newest rates delivered to your inbox by subscribing to our monthly newsletter.

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