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Exciting Improvements to the SBA 504 Debt Refinance Program

Oct 9, 2024

The SBA 504 Refinance Program is changing a few things…let’s take a deeper look!

The U.S. Small Business Administration has recently made improvements to the SBA 504 Debt Refinance program to make it more accessible for small business owners. These changes simplify the qualifications, reduce certain requirements, and provide greater flexibility for borrowers, making it easier for businesses to access this valuable program.

Let’s dive into these key changes…

*All changes are effective as of November 15, 2024

Greater Flexibility in 504 Eligibility

The SBA has simplified the SBA 504 Debt Refinance with Expansion process by lowering the percentage of the original debt that must be eligible for refinancing. Previously, 85% of the debt needed to be tied to 504-eligible expenses (real estate or fixed assets), but this requirement is now reduced to 75%. This change offers borrowers greater flexibility in managing the costs of their original loans and allows for more previously ineligible costs to be included. Overall, this reduced threshold enhanced eligibility and access to the SBA 504 Debt Refinance program, making it easier for borrowers to leverage available resources. The same 75% requirement also applies to debt refinance without expansion.

Higher Loan Limits and Increased Flexibility for Business Expenses

The SBA has raised the loan-to-value (LTV) ratio to 90% for straight debt refinancing with cash out for business expenses. This means borrowers can now refinance with cash out for up to 90% of their property’s appraised value. Additionally, the previous cap on eligible business expenses, which was set at 20%, is removed, enabling borrowers to use even more of their loan for business-related costs. These changes significantly increase access to capital through the SBA 504 Debt Refinance program.

Expanded Debt Refinance Options

The SBA is allowing certain types of “other secured debt” to be included as eligible business expenses for straight debt refinance projects. This means that refinancing can now include other types of business debt that are secured with the same collateral as the qualified debt. Borrowers can use existing secured debts—such as a secured line of credit—alongside their qualified debt for refinancing. Removing this limit opens up more opportunities for borrowers to utilize SBA 504 Debt Refinance program.

Greater Flexibility in Assessing Refinancing Benefits

The SBA also updated its rules to broaden the criteria used to determine if the refinance is beneficial to the business. Previously, loans required either a balloon payment or a 10% repayment reduction to qualify for refinancing. With these changes, there’s no longer a 10% reduction requirement, allowing borrowers to qualify regardless of the amount of the payment reduction. Because any improvement in repayment terms can now qualify, business owners can more easily leverage this financing tool to refinance their debt and get better repayment terms.

We are excited about these improvements to the SBA 504 Refinance Program and the positive impact they will have on our borrowers. 

For more information on how the updated SBA 504 Refinance Program can benefit you or your clients: