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How the SBA 504 Debt Refinance Program Can Help Your Business

Feb 9, 2024

If you have ever taken out a loan before, you have probably been encouraged to look into refinancing.

Some people refinance their student loans, their home mortgages, or even their car payments. What many do not know, however, is that there are programs out there specific for business owners who are looking to refinance their commercial debt and get an even better financing deal for their business.

But what are these programs and how are they beneficial? We’re here to share with you everything you need to know about one of our favorites – the SBA 504 Debt Refinancing program – and how it can help you and your business for years to come.

What is Debt Refinance?

The SBA 504 Debt Refinancing program is a program offered by the U.S. Small Business Administration in conjunction with a Certified Development Corporation (CDC) like Dakota Business Lending.

Through the program, borrowers may be eligible to refinance existing commercial debt, allowing them to restructure their loan payments, possibly cash out equity for business operations, and improve cash flow of the business or accommodate opportunities for growth.

There are two SBA 504 Debt Refinance options available.

Straight Refinance

Standard refinance program used to lock in lower rates with the option to get cash out for business expenses. 

Debt Refinance with Expansion 

Can be used to refinance existing debt and cover new project costs such as: land, building, construction, renovations, machinery, equipment, furniture & fixtures, professional fees, and other expenses, as long as the existing debt does not exceed 100% of expansion costs. 

Benefits of Debt Refinance

The SBA 504 Debt Refinance program can be a great opportunity to restructure your existing commercial debt. Benefits of the program include:

Lock in Low(er!) Rates

One of the greatest benefits that the SBA 504 Debt Refinancing program has to offer is the ability to take loans of higher interest rates and refinance them with a reduced interest rate that will save your business money on a month-to-month basis.

In higher interest rate environments, this program is timely as it allows you to avoid the increasing rates and lock in fixed, below-market rates. Rates on the 504 portion of the refinance project are fixed for the entire 20- or 25-year term!

Stretch Out Your Payments

Through the SBA 504 Debt Refinance program, you can refinance loans that may be close to maturity with a balloon payment, stretching out your loan payments over a longer period and reducing the amount of the balloon payment at a later time.

Get Cash Out for Business Operating Expenses

The SBA 504 Debt Refinancing program also has the option to get cash out for business operating expenses, meaning you can use a portion of your equity in commercial real estate and finance it along with your remaining balance on existing debt to use for business operating expenses over the course of the next 18 months for normal operations or expansions.

Eligible Uses

Through the SBA 504 Debt Refinancing program, you can refinance certain types of commercial loans including:

  • Existing commercial real estate debt
  • Existing debt on equipment and other long-term fixed assets
  • Professional fees related to the project
  • Cash out for the business operating expenses

    How to Qualify

    Small business owners must meet certain critera to be eligible for the SBA 504 loan program including:


    Original debt incurred 6 months ago


    75-85%+ of original use of proceeds for commercial real estate debt (may also include equipment and other long-term fixed assets)


    100% incurred for the benefit of the business


    NO change of ownership in business for the past two years (limited change may be considered if not change in management)


    Review of payments for past 12 months


    Modifications in past 6 months to be reviewed on case by case basis


    Federally guaranteed debt may be available for refinancing under specific conditions


    Business occupies 51%+ of commercial real estate

    For more details on the requirements, download our SBA 504 Debt Refinance Checklist.

    *This is a very basic overview of program qualifications and there may be variables. Please reach out to our team to discuss details for your specific projects.

    Financing Structure

    The structure of the SBA 504 Debt Refinance project is based on the appraised value of the collateral being refinanced. From there, we back into the structure using the amount of debt to be refinanced and any cash out that is being used.

    Contact a loan officer in your area to get an idea of what a structure would look like for your project.

    As you can see, this program offers both short and long-term effects for business owners as they work to grow, expand, and set their business up for success.

    For more information on the SBA 504 Debt Refinancing program, you can visit our webpage.

    Be sure to contact a loan officer in your area for more information on the program/application and find out if you are eligible for this great deal for your business!