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

Small business owners can reduce their monthly mortgage payments and access trapped equity in commercial real estate they own by refinancing conventional real estate loans through the SBA’s new 504 Debt Refinancing Program.

Under the program available through Central Minnesota Development Company (CMDC), small businesses have access to below-market, fixed interest rate refinancing with terms up to 25 years for up to 90% of the appraised value of commercial real estate property. Refinancing eligible business operating expenses (cash-out option) is also eligible.

Overview of the 504 Debt Refinancing Program

  • All applicable SBA 504 Loan Program requirements still apply to loans made under the 504 Debt Refinancing Program. SBA 504 loan proceeds are to 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 refinancing eligible business operating expenses (cash-out option), a maximum 85% LTV applies, and 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.

  • SBA 504 refinancing costs may also be included in the loan.

  • 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.

  • Debt is not included as an eligible business expense, except debt incurred with a credit card or a business line of credit (if the credit card or business line of credit is issued in the name of the small business and the applicant certifies that the debt being refinanced was incurred exclusively for business-related purposes).

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