Debt Refinance Guide

There has never been a better time to refinance existing debt with the SBA 504 Loan Program!

  • Fixed-Interest Rates for the Life of the Loan
  • Cash Out – Provide needed liquidity for eligible business expenses (W/O Expansion)
  • Improve Financial Institution’s LTV
  • Improve Borrower’s Cash Flow
Is Your Project Eligible?

Eligibility Checklist (With Expansion)

  • Substantially all (75% or more) of the existing debt was used for 504 eligible purposes (To acquire land, land and building, construct a building, or purchase equipment)
  • Existing debt is collateralized by fixed assets
  • All existing fixed asset collateral must continue serving as collateral for 504 loan unless waived by SBA
  • Existing debt was incurred for benefit of small business concern
  • Small business (OC) must be the same for debt refi and new expansion costs – debt refinanced may be owed by the OC, holding company, or both
  • Refinancing must provide “substantial benefit” to borrower (New payments must be lower than the existing payments or have a balloon) 
  • Borrower has been “current on all payments due” on existing debt for the past 1-year (or on all payments if note is less than a year)
  • Refinancing will provide better terms or rate of interest than existing indebtedness on date of refinancing (Examples include longer maturity, lower interest rates, or improved collateral conditions)

  • Important information

    1. Refi debt limited to 100% of new expansion costs
    2. “Expansion” – Any Project involving acquisition, construction or improvement of land, building or equipment for use by the small business concern (SBC)
    3. Existing debt amount exceeding 100% of expansion costs cannot be included in the 504 project BUT the excess amount can be consolidated with TPL perm note (must be the SAME property). If debt refi property and expansion property are DIFFERENT, excess can be refinanced in a third lien position.
    4. Debt being refinanced does not need to be for assets at same location or for same type of property as “new” project, provided operation at other location has same NAICS code as operation at “new location”

Eligibility Checklist (Without Expansion)

  • Must be considered a Qualified Debt
  • Substantially all (75% or more) of the proceeds were used for 504 eligible purposes (To acquire land, land and building, construct a building, or purchase equipment)
  • Qualified debt must have been in place for at least 6 months prior to SBA application
  • Was incurred for the benefit of the small business
  • Has been secured by Eligible Fixed Assets for at least 6 months
  • May include debt subject to a federal guarantee, under certain conditions

      • If the loan being refinanced is guaranteed by a Federal agency other than SBA, the CDC must document in writing that the refinancing of the Federally-guaranteed loan is permissible under the other Federal agency’s requirements or is otherwise approved by the other Federal agency
      • If refinancing an existing 504 loan then TPL loan and 504 loan must be refinanced
      • Must notify existing CDC or 7(a) lender in advance of refi loan application submission to SBA (10 biz days)
  • Current on all payments due removed but still use prudent lending practices
  • Applicant must be in operations for 2 years prior to refi
  • Must Meet 51% or more occupancy requirement at the time of SVA application

  • Important Information

    1. You can finance special use properties up to 90% with this program (it’s been waived since August 2020), this could change
    2. Can include cash out for Eligible Business Expenses (EBE)
      • Business operating expenses incurred but not paid at SBA application date or that will become due within 18 months of SBA application date.
      • May include accrued expenses (such as salaries, rent, utilities), inventory, and other business expenses – no capital expenditures.
      • May include other business debts if: Debt meets definition of other secured debt, OR Business lines of credit and business credit card debt used for business expenses (needs to have been secured for at least 6 months, must be current on all payments due)
        • Examples of Other Secured Debt uses: ¡ “day-to-day” expense, Materials, Inventory, Working capital
        • Other secured debt does not include debt used for capital expenditures
      • Applicant and CDC must certify in the loan application that the debt being refinanced was incurred exclusively for EBE
      • No limitations other than 90% LTV max on project

For more information, please download our Debt Refinance Guide below.

Download our 504 Debt Refinance Guide
If your project meets all the basic eligibility requirements, please contact one of our Loan Officers!

Every deal is different but the GLCF team is here to help.