SBA 504 Refinance Rule Changes: What Small Businesses Need to Know in 2025

At CDC Small Business Finance, part of the Momentus Capital branded family of organizations, we know your small business needs access to affordable financing to grow. Refinancing is often the key to your long-term stability. That’s why we want you to know about SBA refinance rule changes.  

These changes give you more ways to refinance your debt, lower your payments, and free up cash to invest in your future. Additionally, they allow primary lenders more leeway in their offerings and remove some of the restrictions to helping their borrowers.

Let’s walk through what’s new, and how CDC Small Business Finance can help you take advantage of it.

What is the SBA 504 Loan?

The SBA 504 loan helps small businesses buy owner-occupied real estate, major fixed assets like equipment, or improve their properties. It offers long-term, fixed-rate loans with lower down payments than traditional commercial real estate loans.

The 504 loan utilizes a 50-40-10 structure, whereby the primary lender loans 50 percent of the cost, the SBA loan covers 40 percent of the loan, and the borrower only needs a 10 percent down payment.

With the 504 refinance option, your business can take advantage of these favorable terms to refinance your current debt.

“These new SBA 504 refinance rules open the door for more businesses to take control of their finances — on their terms.”

– Andrew Mort, VP and commercial real estate sales manager at CDC Small Business Finance

What’s new in the SBA 504 refinancing rules?

The SBA has made the 504 refinance program more accessible by removing limits, expanding eligibility, and offering more flexibility.

Here’s what’s changed:

Removal of the 50% Cap on Debt Refinance Without Expansion

Previously, you could only refinance half of your debt if you were expanding your operations. The removal of the 50 percent cap means you don’t need to acquire new property or build new facilities to refinance your qualified existing debt to utilize the 504’s standard loan structure.  

Your business doesn’t need to come up with extra cash or additional financing to get better interest rates, longer terms, or lower monthly payments.

Increased Loan-to-Value Ratio to 90% and Elimination of the 20% Cap on Eligible Business Expenses

You can now refinance up to 90 percent of the appraised value of your assets. Plus, there is no limit on the operational costs that you can include in your refinance, as long as your total financing stays within your 90 percent loan-to-value (LTV).

These operational costs, known as eligible business expenses (EBE), have also been expanded and may include:

• Salaries and wages
• Rent and utilities
• Inventory purchases
• Business credit card balances
• Maintenance and operating expenses

Alignment of the “Substantially All” Standard at 75% for Refinancing with Expansion

To qualify for SBA 504 refinancing, at least 75 percent of your original debt must have been used for commercial real estate or major equipment – the purposes the 504 loan is intended to finance. 

Previously, refinancing with expansion was interpreted as needing 85 percent of the original debt to qualify. This was vague and inconsistent with other SBA loans. Now, the SBA clearly defines this as 75 percent, making the process simpler for everyone.

Elimination of the 10% Substantial Benefit Test on Refinancing Government Debt

This removes the requirement that the refinancing of any existing government-guaranteed loans – such as SBA or USDA loans – must provide a monthly payment at least 10 percent lower than the old payment for that same debt.  

This previous threshold could be challenging to meet in some circumstances, even when refinancing could still offer other significant benefits like a fixed interest rate longer loan term.

Now, you can refinance these loans more easily, and without extensive documentation.

Inclusion of “Other Secured Debt” as Eligible Business Expenses

Your small business can include more kinds of loans when refinancing business debt. If you have loans secured by assets like vehicles or smaller equipment, you can consolidate them within your SBA 504 refinance. 

Examples of other secured debt include:

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

Real Benefits of the New SBA 504 Refinancing Rules

For Borrowers:

• Lower monthly payments: Refinancing can lower your monthly payments and improve cash flow.
• Fixed interest rates: SBA 504 loans offer below-market, fixed interest rates, providing you with long-term, predictable expenses.
• Access to capital: Refinancing existing debt frees up capital for you to invest in growth.
• Easier consolidation: Greater flexibility in what you can refinance provides you the opportunity to manage a single structured loan instead of many.

For Primary Lenders:

• Safer Lending Positions: You typically finance only 50 percent of the project, reducing your risk.
• Expanded Borrower Pool: Easier qualification criteria means there are more qualified borrowers and likely you will close more loans.
• Competitive Advantage: Offer better terms to your borrowers as compared to conventional loans with variable terms or balloon payments.

Here’s a quick comparison of the key SBA 504 refinance rule changes:

Final Thoughts on Your Business Loan Refinance

The SBA 504 refinance rule changes offer your small business flexibility and accessibility when restructuring your debt. Whether you’re refinancing a building, consolidating equipment loans, or freeing up capital, these updates create new opportunities to strengthen your financial foundation.

At Momentus Capital, we’re committed to investing in your small business. Our continuum of capital allows us to work with you to find the best solution for your specific needs. In addition to SBA 504 loans, we offer community development loans, non-dilutive funding, and SBA Community Advantage loans. We provide you access to the capital and opportunities you deserve.

Where to Learn More: Official SBA 504 Refinance Guidance