If you are a small business owner feeling the weight of a financial burden on your real estate loan, you can get help through the SBA 504 refinance.

What is It?

The Small Business Administration or SBA 504 Loan Refinance Program is a loan restructuring system designed to help business owners refinance existing debt with significant savings. This is made possible by applying lower fixed rate solutions to loans instead of adjustable, a high-rate system.

What’s in It for You?

The program offers 504 loan rates that are easier for business owners who need a lighter structure to pay their real estate loans. With the SBA 504 refinance scheme, business owners can save and channel funds to their business to help it grow.

SBA refinance loan is a helpful tool to give them room to operate their business without the limiting effects of paying heavy rates and terms. Applying for an SBA loan to refinance commercial real estate is a sound business move, especially when you want to manage and maximize your cash flow.

With this straightforward and supportive system, benefits like consolidating and paying off existing loans at a lower, fixed rate not only impacts a business, but also has far reaching effects in helping the local economy’s growth and sustaining it.

Can You Refinance a 504 Loan?

Yes, as long as the requirements are complied with. Let’s get to know more about the SBA 504 refinance guidelines. The structure of the SBA 504 refinance rules is similar to 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.

SBA 504 Refinance Program Key Points:

Borrowers may cash out

The SBA 504 cash out refinance feature allows eligible borrowers to 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. SBA 504 refinance rates take away the burden of mounting interests on various loans because they are treated as one, thereby decreasing their aggregate amount.

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. The SBA 504 refinance with expansion empowers small business owners to think big for their business and chart a long-term progressive path through growth strategy investments.

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:

If you’re a small business owner, you must fulfil the following criteria to be eligible for the SBA 504 loan refinance program:

  • 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 the 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? This tool is your opportunity to improve and optimize your business cash flow for long-term gains.

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.