New SBA 504 Refinance Rules: What Business Owners Need to Know

Business owners

If you want to refinance your commercial mortgage, an SBA 504 refinance is a great business loan option. You’ll get a longer repayment term, a fixed interest rate, and even have an opportunity to cash out equity in the building to help your business grow! New rules published by SBA make it even easier to qualify for the program, as long as your existing debt is eligible.

Thanks to its beneficial loan terms, most borrowers can lower monthly payments by refinancing to an SBA 504 loan. Before you apply, though, it’s important to understand some key points about the SBA 504 refinance option that may be different than other small business loans, including eligibility and the application and loan processes.

Pursuit created this guide to help you be better prepared if you choose to apply and, as always, we’re available to help with this or any of our loans.

Is an SBA 504 refinance right for your business?

While SBA 504 loans are a great option for small businesses that are purchasing or renovating real estate and buying major equipment, SBA 504 loans also offer the option to refinance eligible business debt, including mortgages for real estate related to the business.

SBA 504 refinance loans offer:

  • Long-term repayment schedules, from 10-25 years (depending on the specifics of your loan), compared to more typical 5-10 year terms
  • Below-market, fixed interest rates for the life of the loan, making it easier to plan and budget for your business
  • Lower owner-equity requirements, with financing up to 85-90%


Another major advantage: Convert equity to working capital. If your business is eligible for an SBA 504 refinance, you can apply for up to 20% of the appraised value to be used for eligible business expenses (within an 85% loan-to-value ratio). This means that business owners can recoup existing equity as working capital at a low interest rate with longer repayment terms, making it a very affordable option.

SBA 504 refinance: Basic eligibility criteria

To be eligible for an SBA 504 refinance, your business needs to meet these basic criteria:

  • The business must be in operation for at least two years.
  • The mortgage debt to be refinanced must be at least six months old.
  • The existing mortgage must have been used or a refinance of a prior loan that was originally used for an eligible SBA 504 project. In other words, if the original project wouldn’t have been an approvable SBA project, then you may not be able to refinance with a 504.
  • Recently expanded eligibility guidelines now allow loans to be eligible for 504 refinance even if the existing loan is an existing SBA 7(a) or 504 loan. Ask a Pursuit lender if you qualify.

What documents are needed for an SBA 504 refinance?

Here are some of the key documents needed when you apply for an SBA 504 refinance:

  1. A copy of the existing, recorded mortgage agreement and deed, including any amended or modified agreements.
  2. Payment transcripts for the 12 months leading up to the application date (the monthly statements from the current mortgage lender are sufficient, as long as they show balances and payments).
  3. Documentation of business operating expenses if you’re interested in using equity for eligible business expenses. This includes breakdowns of expenses incurred but not paid by the date of your application or that will be due within 18 months from the date of application. The types of expenses can include salaries, rent, utilities, inventory and other expenses that aren’t capital expenditures.

Real-life example: Learn how a Pursuit client used an SBA 504 refinance loan to lower monthly debt-service payments by $30,000 and gain access to $1 million in working capital from equity in real estate.

Pursuit can help

Our goal is to help small businesses get the funding they need to succeed and we’re committed to helping your small business grow stronger. We offer access to more than 15 loan programs, including the SBA 504 refinance. And if you have small business debt that’s not qualified under the SBA 504, we have additional options that may help.

To learn more about how we can help, contact us today.

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