Tuesday, July 9, 2024

Can You Refinance An Sba 504 Loan

Don't Miss

Why Is Now A Good Time To Consider A 504 Loan

How to Refinance Your SBA 7a Into an SBA 504

As part of the SBAs COVID-19 debt relief efforts, they are currently offering to pay 6 months of principal, interest, and any associated fees that borrowers owe for new 504 Loans disbursed prior to September 27, 2020!

Borrowers do not need to apply for this assistance. It will be automatically provided for loans made after March 27, 2020 and fully disbursed prior to September 27, 2020. The SBA will begin making payments with the first payment due on the loan and will make the subsequent six monthly payments.

In addition to the standard 504 Loan Program, the SBA also offers the 504 Refinancing Program. The SBA 504 Refinancing Loans are very similar to standard 504 Loans, but these loans are important tools designed for business owners to refinance existing debt into a 504 Loan.

Sba 504 Refinance Loan Program For Business Expansion

The 504 loan program allows a refinance and expansion as long as the debt to be refinanced does not exceed 50 percent of the projected expansion cost. .

For example, if you currently owe $1,000,000 on your commercial building your expansion cost would have to be $2,000,000 to qualify for a 504 refinance.

Please note that if you have more than 1 location the following provision in the new rules could help you.

*The debt being refinanced does not need to be for assets at the same location or for the same type of property as the project being financed as long as the operation at the other location has the same NAICS code as the operation at the Project location.

Essentially, this means that if your business has multiple locations – perhaps a warehouse and retail stores – and you were looking to expand one of them, you could use the 504 to pay off the debt on one property and expand the other.

Of course, if you have more equity in your property – 30% or more – you may qualify for a conventional commercial refinance, so please get in touch if you would like to look at your options.

Expansion Rules

More Refinance Information

You can visit our SBA 504 Program page if you would like more information regarding 504 loan requirements, qualifying, loan structure, eligible properties, etc.

SBA Alternatives – Small Business Capital

Asset-based programs available include:

What Are Average Used Equipment Loan Rates

Equipment loan interest rates typically range between 2% and 20%. While the variance is as wide as that tractor you’re financing, it’s only because the rate you get largely depends on your credit score and how long you’ve been in business. The higher your credit score, the lower your interest rate will likely be.

Recommended Reading: Fha Refinance Pmi

Refinancing Of An Sba Loan

SBA loans can be more difficult to obtain than other types of business refinancing options. But the SBA 504 loan program is still worth considering. While the program may have its challenges, a new SBA loan has the potential to be an affordable refinancing solution for some businesses.

To qualify for an SBA 504 loan, your business must have existed for at least two years. Even the debt you are looking to refinance cannot be less than two years. You will need to prove that the original loan was for an SBA 504 approved purpose. In other words, your business had to use those funds to purchase an eligible asset such as land, equipment, or property owned by the owner.

It is also vital to show that your business has paid its credit obligations on time for at least the past 12 months. And you cant use the 504 program to refinance existing government-guaranteed loans.

Is The 504 Refinance Loan Program Right For Me

4 Uses of SBA 504 Loan Program

If youre looking to refinance an owner-occupied commercial real estate or another type of fixed asset purchase, you may be a candidate for the 504 refinance loan program. Get started online and well reach out to talk individually about your financing needs and determine if the 504 refinance program is right for you.

Recent changes to the 504 Refinance Program now make it eligible to refinance a loan even if it is an existing SBA 7 or SBA 504 loan. Here are the general SBA 504 refinance guidelines:

  • Debt must have been incurred for an owner-occupied commercial real estate, land, or equipment purchase or a renovation
  • Debt was incurred more than 6 months ago
  • Your business must be in operation for 2 or more years

The SBA 504 refinance loan program is versatile and can be used to refinance a variety of fixed-asset expenses, such as:

  • Owner-occupied commercial real estate, such as an office, manufacturing facility, or storefront
  • Land purchase
  • Renovation
  • Heavy machinery or equipment purchase

You can also cash out up to 20% of the property value and use the funds to pay off credit cards, pay down payables or create cash to pay for future operating expenses. Other business expenses, such as salaries, rent, utilities and inventory can be included in the same loan. Your lender can help you understand if your expenses are eligible.

The SBA 504 refinance loan program is administered by Pursuit CDC

You May Like: How Do Mortgage Loan Officers Make Money

Its Time To Refinance To A Fixed Rate

Were not making any predictions here but ultra-low interest rates cant last forever. If past is prologue then rates will rise again, along with a business owners monthly cost of capital.

Companies need capital to grow. Both the SBA 504 and the Liberty SBF Conventional loan programs allow owners to take advantage of the equity in a commercial property at a fixed-rate to control rising monthly payments and expand their businesses.

Talk to us about options to refinance a rising adjustable rate commercial real estate loans into one of our fixed rate programs. And, as always, were more than happy to help.

Contact Liberty SBF today. Email or call 297-5747.

You can also connect with Liberty SBF on

What Is A Cdc

CDCs are established under the 504 Code as Non-profit Corporations, set up to support economic growth in their local areas. In Wisconsin, the CDC is Wisconsin Business Development . WBD is one of the most successful CDCs in the country, and has partnered with hundreds of local lenders to help thousands of small businesses since 1981.

For Northern Illinois, the CDC is Rockford Local Development Corporation and has been helping the growth of small businesses since 1979. RLDC has helped more than 600 area businesses, stimulating the local economy.

For those who live closer to Chicago, CDC’s include Growth Corp., SomerCor, and Wessex 504. These lenders have supported local businesses in the Chicago area for a long time, helping grow local economies and communities.

To see a full list of CDC’s, visit the SBAs website.

Also Check: Bayview Loan Modification

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 borrowers real estate and equipment .

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 borrowers 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: roll refinance costs into the new loan or pay the costs directly without increasing their total loan amount.

Small Businesses Can Refinance Commercial Mortgage And Other Business Debt Under The Sba 504 Loan Program

SBA 504 Refinance Program Basics

Small business owners can lighten their monthly debt payments and access equity trapped in commercial real estate holdings by refinancing conventional real estate loans through the SBAs 504 Debt Refinancing Program with or without expansion.

Under the program available through Florida First Capital/First Capital Finance, small businesses can take advantage of below-market, fixed interest rate refinancing with repayment terms up to 25 years for up to 90% of the appraised value of commercial real estate property.

Loans made under the 504 Debt Refinancing Program are 504 loans and are subject to all applicable SBA 504 Loan Program requirements.

504 Debt Refinancing WITHOUT Expansion

504 Debt Refinancing WITH Expansion

Debt refinancing with expansion is a strong option for small business owners looking to grow and expand their operations and reduce commercial debt at the same time.

  • The maximum LTV is 90% of the fair market value of the eligible fixed asset .
  • A project involves expansion if it includes the acquisition, construction or improvement of land, building or equipment for use by the borrower.
  • Any amount of existing qualified debt that does not exceed 100% of the cost of the expansion may be refinanced.
  • The debt being refinanced will be added to the expansion cost to establish the total project costs.

Refinance of Existing Government Guaranteed Debt

Qualification Criteria

Loan Structure/Down Payment Schedule

You May Like: Can Mortgage Lenders Verify Bank Statements

Two Options For Refinancing

Eligible businesses have two options for refinancing through the 504 Refinance Program. This first is to refinance existing debt without expansion. This type of transaction is often referred to as a straight refinance. If you exercise this option, you can refinance debt for qualifying capital assets like real estate and equipment.

With a straight refinance, you can cash out equity, secure a lower interest rate and turn equity into operating capital. Those capabilities can improve your operations cash flow and enable you to hire more employees if necessary.

The other option is to refinance with expansion. If you need financing to expand your business by buying real estate, making renovations to your current property or purchasing long-term equipment, you may qualify to refinance existing debt for eligible 504 Loan Program assets while you secure funds for your expansion at the same time. The maximum you can borrow to refinance existing debt is 50 percent of the amount you borrow for your planned expansion project.

If you qualify for an SBA 504 refinance with expansion loan, it can help you consolidate debt and it may extend your loans terms. You may also benefit from lower payments on your existing debt when you roll it into a new long-term 504 refinance with expansion loan.

What Can An Sba 504 Loan Be Used For

A 504 loan can be used to purchase fixed assets that promote business growth and job creation, according to the SBA. These assets could include a new building, equipment or machinery.

You can also use a 504 loan to build or upgrade facilities, including utilities, streets or parking lots.

Unlike more general term loans, a 504 loan can’t be used as working capital or to purchase inventory, repay or refinance debt, or invest in rental real estate.

Next steps to getting an SBA loan:

Also Check: Why Isn T My Auto Loan On My Credit Report

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:

  • A copy of the existing, recorded mortgage agreement and deed, including any amended or modified agreements.
  • Payment transcripts for the 12 months leading up to the application date .
  • Documentation of business operating expenses if youre 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 arent 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.

    What If Ive Tapped My Equity Can I Still Qualify For An Sba 504 Refi

    Daily Herald Business Ledger: Small businesses needing ...

    During the life of your conventional commercial real estate loan, you may have tapped your equity to access working capital, which is a common practice among business owners.

    If thats your case, you may still qualify for a refinance through the SBA 504 program. SBA 504 lenders like CDC Small Business Finance consider the bookend decision of your loan from its original acquisition purchase being eligible to its current appraisal value versus loan cost not exceeding 85% to 90%.

    As long as you meet the program requirements, then you will likely qualify for an SBA 504 loan.

    You May Like: Usaa Auto Loan Approval Odds

    Chilcott: Refinancing With Sba 504 Loans Can Keep Small Companies In Business

    This reprinted column by Kurt Chilcott, CEO and president of CDC Small Business Finance, originally appeared in the Scotsman Guide in the fall.

    It has been roughly a decade since the last serious economic downturn gripped our nation. Back then, commercial mortgage brokers had to scramble to find and close deals. The ones who made it to the other side of that deep recession are now challenged to succeed amidst an unprecedented crisis created by the COVID-19 pandemic. But how will they make it this time? Brokers bring various skills to bear in helping small-business clients grow and create jobs, including knowledge of their markets and industries, relationship building and personal tenacity. But its fair to suggest that those with a solid knowledge of the available financing tools will remain a step ahead of their peers as the economy begins to recover. One of the more versatile and yet underused financing tools is the 504 refinance program from the U.S. Small Business Administration , which can be used to rid a small business of costly private debt and generate positive cash flow.

    Kurt Chilcott

    What Is The Sba 504 Refinance Loan Program

    An SBA 504 loan can be used to refinance debt previously incurred for commercial real estate and fixed-asset projects at below-market rates. With the SBA 504 refinance loan program, you can not only refinance debt but also cash out up to 20% of the value of the property for working capital needs. You can refinance up to 100% of eligible expenses for a prior fixed-asset project at below-market rates with a term of up to 25 years. A 504 refinance loan is unique because it always needs to be combined with a bank loan. Heres how a typical 504 refinance loan works:

    • A bank refinances 50% of project costs with a traditional loan
    • Pursuit refinances up to 50% of project costs using the 504 loan program
    • An as is fair market value appraisal will need to demonstrate over 10% equity in the property with the proposed financing.

    If you have a bank on hand for the first mortgage, well work with them to incorporate the SBA 504 loan refinance program into your debt refinance plan. If you dont, we can point you towards a bank thats familiar with the 504 refinance loan program.

    You May Like: Usaa Rv Loan Rates

    What Is The 504 Refinancing Program

    In addition to the standard 504 loan program, the SBA also now offers the 504 refinancing program. These loans are important tools that allow business owners to refinance existing debt into a 504 loan. Note that you cannot refinance an existing 504 loan, and all loans refinanced with the program must be a zero subsidy. So, how does the program work?

    First, the debt being refinanced must be a commercial loan. It cannot be any type of SBA loan. Second, 85% of the proceeds of the original business loan must have been used for purposes that would have been approved under a 504 loan. That means it must have been used for fixed assets, and cannot have been used for working capital, or paying off other debt.

    The other 15% must have been used to benefit the company in some way. The original debt must be at least two years old before you can apply for 504 refinancing. Currently, business owners must make a 15% contribution .

    Next, the loan must have existing eligible assets to secure it they are used as collateral in the refinance. Additional equity built up by loan payments can be used to pay any business expenses that might be eligible, as well. This includes using some of the refinancing proceeds as working capital.

    Of course, the 504 refinancing program may or may not be right for your needs. You can find more information about the program, as well as the final rule issued by the SBA in mid-2018 here.

    What Are The Loan Parameters For An Sba 504 Loan

    Innspire Conference 2020: SBA 504 Refinance Loan – A Tool For Recovery

    Maximum SBA loan amount: Loans are generally capped at $5 million

    Interest rate: Below-market interest rates are fixed for the life of the loan

    Required equity: A low-down payment conserves your working capital

    Terms: 10, 20 or 25 – year terms

    Use of proceeds: Long-term, fixed assets for expansion or modernization . Refinancing of large equipment and/or owner-occupied commercial real estate may also be possible.

    Don’t Miss: California Loan License

    More articles

    Popular Articles