Are you a small business owner seeking to reduce the financial burden on your business? The SBA’s 504 Debt Refinance Program is designed to help business owners refinance existing debt with a significant savings, thanks primarily to getting rid of adjustable, high-rate loans in favor of a lower, fixed rate solution.  Simply consolidating and paying off existing loans at a lower, fixed rate not only impacts a business, it also has greater effects on helping to grow the local economy as well.


The SBA 504 Debt Refinance Program is structured a lot like the standard 504 Loan Program with three core elements:

  1. A loan (first mortgage) that is secured with a first lien from a private-sector lender, covering 50% of the total loan amount.
  2. A second mortgage that is secured via a Certified Development Company (CDC), backed by a 100% SBA-guaranteed debenture, covering up to 40% of the loan amount.
  3. A 10% equity requirement from the small business borrower.

504 Debt Refinance Program Key Points:

Borrowers may cash out

Eligible borrowers may obtain cash for up to 20% of the appraised value of their business assets to use towards future operating expenses. The maximum loan-to-value for this option is 85% of the borrower’s real estate and equipment (based on required and acceptable appraisals).

Consolidate debt

With an SBA 504 Debt Refinance, borrowers may consolidate high-interest, adjustable debt obligations at a lower and fixed interest rate. Not only can this ease the burden of having loan obligations to several different lenders, it can also improve the borrower’s monthly debt service requirements allowing the business to grow and hire more employees.

Friendlier Terms

The SBA Debt Refinancing Program offers terms up to 25 years. Converting short-term debt into long-term financing can greatly improve cash-flow.

No Out-of-Pocket Expenses

The 504 Debt Refinance Program allows borrowers to finance ordinary closing costs and expenses. The borrower has the option to either: (a) roll refinance costs (appraisal, title, lender fees, etc.) into the new loan; or (b) pay the costs directly without increasing their total loan amount.


Eligibility Criteria:

  • At least 85% of the original loan (that is being refinanced with the 504 Debt Refinance Program) must have been used to acquire, construct or improve fixed assets.
  • The borrower must have been in business for 2 years prior to submission of the refinance application and been in operation for all of the 2-year period ending on the date of application, as evidenced by the financial statements submitted at the time of application.
  • The property must be owner occupied, i.e., the business must occupy at least 51% of the total square footage.
  • Debt must have been incurred not less than 2 years prior to the date the refinance application is received by the SBA. However, in certain situations loans refinanced within the 2 years prior to the date of application may be eligible.
  • The loan to be refinanced must be current on all payments due (no payment more than 30 days past due from either the original payment terms or modified payment terms) during the one-year period prior to the date of the refinance application.
  • An independent appraisal of the fair market value of the project assets and any additional assets offered as additional collateral must be provided. Appraisals are not required at time of application, but are required prior to closing and must be dated no earlier than 1 year prior to the date the application was approved by the SBA.

Ready to learn more about how the SBA 504 Debt Refinance Program can help your business THINK BIG and relieve added financial burden? Call us today at 1-800-SBA-REAL. 

Helping Small Business Think Big

BFC is Southern California’s leading SBA 504 loan Program expert, with over 20 years in the industry. We help California businesses grow by facilitating the premier tool for Real Estate financing—the SBA’s 504 loan.

Find out if your business is eligible.