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

  • First lien conventional note from a private sector lender covering up to 50% of the project cost
  • Second lien SBA note (debenture) secured from a certified development company (CDC), which is fully backed by the U.S. government, covering up to 40% of the project cost
  • Borrower equity of at least 10%
  • Term of the second lien note is 10, 20, or 25 years.
  • Interest rate on the second lien note is fixed when the loan is funded
  • Terms for first lien loan are negotiated with the lender but must be 10 years on a 20- and 25-year second lien note and 7 years on a 10-year note

Use of the Proceeds

  • Loan proceeds may be used to refinance existing commercial loans whose original proceeds were used to acquire fixed assets considered eligible for the 504 Loan Program.
  • In addition, the 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 the application or that will become due for payment within 18 months of the date of the application. This is limited to 20% of the value of the primary assets securing the note.
  • Loan proceeds can be used for new expansion purposes, such as equipment or real estate, but the refinanced amount cannot exceed the cost of expansion.

Qualified Debt for Refinancing

  • A commercial loan that was incurred for the benefit of a small business concern not less than six months before the date of the application for refinancing.
  • The loan proceeds must have been used substantially (85%) to acquire eligible fixed assets of real estate or equipment. If any of the original proceeds were ineligible for SBA, the entire note is not eligible for refinancing.
  • 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

  • The 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 the application, and there cannot have been a change in ownership for at least two years.
  • The borrower must currently occupy 51% of the building being refinanced.
  • The borrower must be able to obtain a 10% reduction in their refinanced note payment.
  • The loan must have a positive economic impact by 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 allowed loan-to-value of the refinancing project is 85% to 90% depending on property type.
  • 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 for business operating expenses, the maximum loan to value amount cannot exceed 85%, and the business operating expenses portion of the loan may not exceed 20% of the value of the eligible fixed asset.