SBA 504 Debt Refinance
SBA 504 Debt Refinance
SBA 504 Refinance - Long-term, fixed rate option for restructuring existing debt & cashing out equity for working capital
Why choose an SBA 504: The goal of the SBA 504 program is to create and retain jobs through long-term financing of real estate and equipment at a fixed, below-market interest rate. Businesses often need to restructure existing debt to accommodate growth, changes to the market, take advantage of interest expense savings or to reset a longer term on an existing note with an impending balloon payment.
Loan amounts: $25,000 – $5 million (up to $5.5 million in certain cases)
Equity Requirements: Minimum 10%
Eligible projects: The SBA 504 financing packages may be used to:
- Refinance existing commercial real estate debt.
- Refinance existing debt on equipment and other long-term fixed assets.
- Professional fees directly attributable and essential to the project such as appraisals, environmental investigations and title insurance.
- Cash out for business operating expenses due in the next 18 months.
*interest rate for straight refinance is .025% higher than the posted 504 rates - Download our SBA 504 Debt Refinance Checklist for more specific eligibility details of the debt to be refinanced.
- Download our Debt Refinance Structure Worksheet.
Eligible businesses: For-profit corporations, limited liability companies, partnerships or proprietorships with net worth not more than $20 million and average net income not exceeding $6.5 million in the past two years. The project being financed must demonstrate economic impact on its community, primarily through job creation or retention or some public policy objective. Ineligible businesses include investment companies, gambling facilities and lending institutions.
Collateral and security: Mortgage on the land and building being financed; liens on machinery, equipment and fixtures; lease agreements, and personal guarantees from individuals with 20 percent or more ownership in the company (or limited guarantees from those with less than 20 percent ownership). The participating lender receives the first lien on the collateral; SBA holds the second lien.
Terms: 20- and 25-year terms for real estate and long term fixed assets.
Rate: Fixed rate determined at the time 504 loan is funded, 6-8 weeks after project’s completion
Other Questions?
Contact us to discuss project feasibility and details of this and other loan programs.
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Download our SBA 504 Application & Application Checklist below, or better yet! Contact a loan officer in your area to jumpstart the process and have your application prefilled.
Frequently Asked Questions
What loans qualify for SBA 504 debt refinancing?
Existing commercial debt that was originally used to acquire or improve fixed assets such as real estate, land, or equipment may qualify for SBA 504 debt refinancing. The business must be at least two years old, the debt must be at least six months old, and the borrower must have a strong payment history with no significant delinquencies. The refinancing must also provide a clear economic benefit, such as lowering monthly payments or stabilizing cash flow.
Can I use SBA 504 refinance for cash-out purposes?
Yes, the SBA 504 Debt Refinance program allows cash-out in certain cases. Business owners can access a portion of the property's appraised value for eligible expenses such as payroll, inventory, or debt consolidation, provided the funds are used within 18 months. The cash-out portion must directly support business operations and cannot be used for dividends, personal use, or investment purposes. This option helps businesses strengthen cash flow and reinvest in growth.
How does refinancing differ from a new SBA 504 loan?
An SBA 504 debt refinance restructures existing commercial loans, while a new SBA 504 loan funds new projects like property purchases, construction, or equipment acquisitions. Both use the same three-part financing structure involving a bank, a certified development company, and a borrower contribution. The key difference is that refinancing focuses on improving terms, reducing interest rates, and freeing up working capital on assets you already own. Dakota Business Lending can help you determine which option best fits your current situation.
Are there limits on existing debt age for refinancing?
Yes, the existing loan must be at least six months old to qualify for SBA 504 debt refinancing. The debt must have been originally used to acquire, improve, or refinance fixed business assets such as real estate or equipment. The borrower must also have made all required payments on time for the past 12 months. These requirements ensure the debt is stable and that refinancing provides genuine economic benefit. Dakota Business Lending can review your loan history to confirm eligibility.
How does refinancing affect payments and interest rates?
Refinancing through the SBA 504 program often lowers monthly payments by extending repayment terms up to 25 years for real estate and locking in a fixed, below-market interest rate for the life of the loan. This can significantly improve cash flow and reduce financial uncertainty for business owners. The exact rate and term depend on project size, collateral, and market conditions, but most borrowers benefit from more predictable payments and better long-term stability. Dakota Business Lending can help you compare your current loan terms with SBA 504 refinancing options to see the potential savings.
Can I refinance multiple loans with one SBA 504 debt refinance?
Yes, multiple existing loans can often be consolidated into one SBA 504 debt refinance, as long as each loan was originally used to purchase, improve, or refinance fixed assets such as real estate or equipment. Combining loans simplifies repayment, can lower total monthly payments, and helps business owners manage debt more efficiently. All loans included must meet SBA eligibility criteria and show a history of timely payments. Dakota Business Lending can review your loans to determine if consolidation through the SBA 504 Debt Refinance program makes sense for your business.
How does the SBA 504 Debt Refinance program work?
The SBA 504 Debt Refinance program replaces existing commercial debt with a new SBA 504 loan that offers long-term, fixed-rate financing. The structure mirrors a standard SBA 504 loan, with a bank providing a portion of the financing, a certified development company providing the SBA-backed portion, and the borrower contributing an injection. This setup often reduces monthly payments, stabilizes interest rates, and improves cash flow for business owners carrying higher-rate or variable-rate debt.
