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an SBA 504 REFI

SBA 504 REFI GUIDE

Key Guidelines

  • Can refinance one or more commercial loans that are secured to the same “Eligible Fixed Asset”.
  • Maximum refinance LTV – 90% of the value of collateral pledged for existing mortgage. Cross collateralization of other fixed assets is allowed to get to 90%.
  • Maximum refinance LTV – 85% of the value of collateral pledged when mortgage refinance request also includes working capital. The aggregate amount of working capital cannot exceed 20% LTV.
  • Loan(s) to be refinanced must be at least 24 months old and in good standing for the last 12 months.
  • Business must be operating for 2 or more years with no full or partial ownership changes prior to application.
  • Appraisal is not required to submit refinance application, but will be a condition of funding.
  • Business must be at 51% occupancy at the time of application submission.

Eligible Project Costs

  • Fees associated with the SBA 504 Refi – appraisal, environmental, title, points/interest on interim financing – can be incorporated into the new loan.
  • Any expense of the small business now due to becoming due within 18 months of the 504 loan application can be incorporated into the new Refi loan as working capital.

The following expenses are not defined as working capital cost under this refi program:
  • Acquiring a new business
  • Acquiring a new property
  • Paying down an owner’s personal expenses
  • Change of ownership with buyout or buy down of co-owner
  • Paying off or paying down debt owed to owners

Your local CDC Loan Expert can review your project and prequalify your client for SBA 504 financing within 24 hours.

How to prequalify a refinance request

USE THIS 4-STEP TOOL TO HELP YOU EVALUATE IF YOUR CLIENT’S SCENARIO IS ELIGIBLE FOR REFI VIA SBA 504

1
Business applicant meets all SBA eligibility standards for qualications, size, use, occupancy, etc. for a standard 504 loan.
2
Next find Qualied Debt (mortgage) secured by Eligible Fixed Assets (the 504 use of proceeds assets):

What is Qualied Debt?

  1. Substantially all proceeds loan (85%) were used for 504 eligible costs
  2. 2 year old debt / payments current for 12 consecutive months
  3. Qualied Debt(s) is collateralized by Eligible Asset
  4. Not subject to a Federal guarantee (i.e. USDA, 7a,504)
  5. This type of Refi package is limited to 90% LTV
3
Creatively adding working capital:
  1. These costs are limited to 20% LTV. This can be impacted if the Qualied Debt (mortgage) is greater than 65% LTV.
  2. This type of Re package is limited to 85% LTV
4
LTV Limitations:
  1. Mortgage or secured debts on same asset – Max 90% LTV
  2. Mortgage plus working capital – Max 85% LTV

Refinance Your Commercial Debt

WE ARE HERE TO HELP

Offer SBA 504 Refi to your clients in partnership with the #1 SBA Lender in the Nation, CDC Small Business Finance

Understanding Qualified Debt is key to determining if your client’s project is eligible. Your local CDC Loan Expert can review your project and prequalify your client for SBA 504 refinancing within 24 hours.

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