SBA 504 Refinance Program Overview

The SBA 504 refinance program allows qualifying businesses to refinance existing debt into an SBA 504 loan.   Existing debt could include conventional loans or other SBA debt.

While the SBA 504 refinance program has been  in existense for many years, the SBA has made several important changes to the SBA 504 refinance rules in recent years in order to make the program more accessible and business friendly.   In this article we go over the SBA refinance rules and eligibility in detail.

If you are a small business owner with existing business debt, refinancing into an SBA 504 could be a huge benefit.  With historically low fixed rates and repayment terms of up to 25 years, refinancing into an SBA 504 loan can significantly reduce your monthly payments, improve cash flow, and free up working capital for what matters most — growing your business.

SBA 504 Refinance Rules & Eligibility

To be eligible for an SBA 504 refinance, small businesses need to meet these basic criteria:

• • Operational for at least two years.
  • Mortgage debt to be refinanced must be at least six months old.
  • At least 75% of the original loan was used to acquire, construct or improve fixed assets.
  • The refinance project must be secured by the mortgage that will secure the new loan.
  • Borrowing business must occupy at least 51% of the property being refinanced.
  • The maximum LTV is 90% of the fair market value of the eligible fixed asset(s).

SBA 504 Refinance with Expansion

Small business owners often discover that refinancing existing business debt presents an ideal opportunity to also fund expansion efforts. This could include projects such as remodeling current facilities or opening a second or third location. One of the key advantages of the SBA 504 Refinance Program is that it offers the flexibility to refinance existing debt while simultaneously supporting business growth.

When refinancing existing debt with a business expansion under the SBA 504 loan program, the total project cost is the combined amount of:

• • • The cost of the expansion (e.g., construction, renovation, land/building purchase), plus

    • The amount of qualified existing debt being refinanced.

🧮 Total Project Cost = Expansion Cost + Refinance Amount

Note:
The amount of debt being refinanced cannot exceed the cost of the expansion. For example, if your expansion costs $1 million, you can refinance up to $1 million in eligible debt—making the total project cost $2 million.

Key rules to keep in mind:

• • • Expansion Definition: Your project must involve acquiring, constructing, or improving land or buildings used by your business (e.g., renovations, ground-up construction).

    • Owner Equity: Any existing equity in the property being refinanced can count toward your equity contribution for the new project.

    • Required Documentation: You’ll need to submit cost estimates for the expansion and documentation for the debt being refinanced (including lien information).

    • Existing Loans: You can refinance multiple loans, including SBA 7(a) loans as long as the debt is secured by other assets.

Examples of other secured debt include:

• • • Truck or vehicle loans
    • Equipment loans secured by machinery
    • Secured business lines of credit

Your CDC must confirm that your current lender is unwilling or unable to modify the loan terms to meet the “substantial benefit” threshold.

SBA 504 “Cash-Out” Refinance

Recent changes to the SBA 504 rules now allow businesses to tap into additional equity and cash-out to cover “eligibile business expenses” as long as the financing stays below a 90% loan-to-value.

In other words, lets say a business has a $500,000 note to refinance and the property being refinanced appraises for $1,000,000.   The business owner could refinance the $500,000 note and cash-out up to $400,000 without viloating the 90% loan-to-value thereshold.

However, the SBA does not allow the business owner to cash-out without justifying how the cash-out will help the business.   The business must show how the cash-out can be used to cover operating costs.

Examples of eligible business expenses for cash-out refinance:

• • • Salaries & Wages
    • Rent & Utilities
    • Inventory Purchases
    • Maintenance and operating expenses
    • Business credit card balances

The business can choose to calculate eligible business expenses based on the previous 18 months of operating history or 18 months of forward looking projections.

Returning to our example above, if the business has at least $400,000 of eligible business expenses then they could “cash-out” the full $400,000.   If they have less than $400,000 of eligible business expenses they can only “cash-out” up to that amount even though they would still be below a 90% loan-to-value on the asset.

Keep in mind to be eligible for a “Cash-Out” refinance the business and debt being refinanced have to meet the general eligibility rules for just a straight SBA 504 refinance.

How to Get Started on you SBA 504 Refinance

If you think an SBA 504 refinance might be right for you, now is a great time to take the next step. Our SBA 504 loan experts are here to help you explore your options, assess your eligibility, and guide you through the process.

Get started by connecting with one of our specialists today—we’ll help you understand what documents you’ll need, evaluate your refinancing and expansion goals, and ensure you’re set up for success from day one.

Let’s turn your refinancing opportunity into a smart move for growth. 

What documentation will I need for my loan? 

SBA 504 Complete Loan Application Checklist

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Contact APC Lending today to learn more about the SBA 504 Loan Program and take the first step toward building long-term success for your business.