Small Businesses Can Refinance Commercial Mortgages and Other Business Debt Under the SBA 504 Loan Program

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 SBA’s 504 Debt Refinancing Program.

Under the 504 Debt Refinance program available through CMDC, 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.  In some cases, Borrowers may also refinance eligible business operating expenses (cash-out option) in the overall refinance loan structure.

More About the 504 Debt Refinancing Program

• Loans made under the 504 Debt Refinancing Program are 504 loans and are subject to all applicable SBA 504 Loan Program eligibility requirements.
• 504 loan proceeds can be used to refinance qualified debt.
• For borrowers that refinance only long-term fixed asset debt (no cash-out), the maximum LTV is 90% of the fair market value of the eligible fixed asset(s).
• Eligible fixed assets include land, buildings, machinery, and equipment acquired, constructed, or improved by a small business for use in its business operations.
• When the project involves a limited or single-purpose building or structure, the borrower must contribute not less than 15%.
• Borrowers can also refinance eligible business operating expenses (cash-out option); however, a maximum 85% LTV applies. The business operating expenses portion of the project may not exceed 20% of the value of the eligible fixed asset(s) securing the qualified debt.
• Eligible business operating expenses include any other expenses of the business that are not capital expenditures (e.g., salaries, rent, utilities, inventory, etc.) that were incurred but not paid prior to the date of the refinance application or that will become due for payment within 18 months after the date of application.

For more information about the SBA 504 Debt Refinance Program, contact one of our loan officers today!