504 Debt Refinancing Program

The 504 Debt Refinancing Program is structured like the traditional 504 Loan Program:

  • A first lien loan from a private-sector lender covering up to 50% of the project cost.
  • A second lien loan secured from a Certified Development Company, which is backed by an SBA-guaranteed debenture, covering up to 40% of the project cost.
  • Borrower contribution of at least 10%.
  • Terms on second lien loan are 10, 20 or 25 years.
  • Interest rates on second lien loan are fixed when the debenture funds.
  • Terms for first lien loans are negotiated with lender, but must be 10 years on a 20 and 25-year debenture and 7 years on a 10-year debenture.

Use of Proceeds

  • Loan proceeds may be used to refinance existing commercial loans whose proceeds were used to acquire fixed assets eligible for the 504 Loan Program.
  • In addition, proceeds may be used to pay business operating expenses, including salaries, utilities, and inventory that were incurred but not paid prior to the date of application or that will become due for payment within 18 months after the date of application.
  • Loan proceeds cannot be used for new expansion purposes, such as equipment or real estate.

Qualified Debt for Refinancing

  • A commercial loan that was incurred for the benefit of the small business concern not less than two years before the date of the application for refinance.
  • The loan must not be guaranteed by a federal agency, such as 7(a) Advantage, 504 Grow, or USDA loan.
  • The loan proceeds must have been used substantially (85%) to acquire eligible fixed assets.
  • The debt may consist of a combination of two or more loans, provided that each of the loans satisfies the qualified debt requirements.

Eligibility Requirements

  • Loan being refinanced must have been current for the past year, with no payments being past due for more than 30 days. You must provide a transcript to demonstrate compliance.
  • The company must have been in business for two years prior to the date of application, and there can have been no change in ownership for at least two years.
  • The borrower must currently occupy 51% of the building being refinanced.
  • The loan must have a positive economic impact, adhering to the 504 Loan Program job creation and retention requirements. Loans that meet a community development or public policy goal do not have to meet the job creation requirement.


  • The maximum loan to value of the refinancing project allowed is 90%.
  • If the debt being refinanced is more than 90% of the value of the eligible fixed asset, the borrower must provide additional cash or other fixed asset collateral acceptable to the SBA so as not to exceed a 90% loan to value of the refinancing project.
  • For projects that include financing business operating expenses, the maximum loan to value amount cannot exceed 85%, and the business operating expenses portion of the loan may not exceed 25% of the value of the eligible fixed asset.