SBA published in the Federal Register a Final Rule on the SBA 504 Refinance Program that made the program easier to use.  The effective date of the Final Rule and changes is November 13, 2023.


SBA 504 Refinance Improvements Include

  • The program is able to refinance “Qualified Debt.”  The regulatory definition of the Qualified Debt in which SBA requires is that “substantially all” of the original use of proceeds of the Qualified Debt were for an Eligible Fixed Asset, such as land, buildings, machinery, and equipment. The definition of “substantially all” has changed from 85% to 75% of the original use of proceeds of the Qualified Debt was for fixed assets. It’s now going to be eligible for refinance if 25% of the original use of proceeds were for ineligible SBA 504 purposes.


  • When refinancing a SBA 7a Loan, SBA removed the requirement for written verification that the present 7(a) lender is unwilling or unable to modify existing 7(a) debt. With the Final Rule, SBA is now requiring the CDC to provide advance notice to the existing 7(a) lender in writing (by email or letter) that the new 504 project will refinance the existing 7(a) loan.


  • Added a new requirement that if the 504 project is refinancing an existing 504 loan of another CDC, the CDC must provide advance notice to the existing CDC in writing (by email or letter) that the new 504 project will refinance that CDC’s existing 504 loan.


  • Clarified that in calculating “substantial benefit” of at least 10% payment savings on the debt being refinanced, any subsidy recoupment fees [applicable when refinancing an existing 7(a) loan] payable to SBA by the Borrower must be added to the amount being refinanced along with prepayment penalties, financing fees, and other financing costs. A Subsidy Recoupment Fee applies to certain 7(a) loans with a maturity of 15 years or more, when the Borrower voluntarily prepays more than 25% of its loan in any 1 year during the first 3 years after first disbursement.  The fee applies to the full amount of the prepayment, not just the guaranteed portion of the prepayment. The fee is 5% of the prepayment amount during the first year, 3% the second year, and 1% in the third year. Please refer to SOP 50-10-7, page 49, paragraph C.3. and 13 CFR 120.223 for more details on SBA 7(a) subsidy recoupment fees.



In today’s environment of higher interest rates and liquidity issues, these beneficial changes will make it easier to capitalize on the benefits the SBA 504 Refinance Program can provide.



Big Benefits of SBA 504 Refinancing

  • Low, fixed interest rate on 504  check out the interest rate history
  • Long loan terms – up to 25 years
  • Refinance up to 90% of the appraised property value (if no cash-out)
  • Access cash in the building for salaries, rent, inventory, utilities, payables, etc.
    • If taking cash out for eligible business expenses:  refinance up to 85% of the appraised property value (business expenses are limited to 20% of appraised value)
  • The borrower’s equity in the collateral often fulfills the down payment requirement
  • Payment stability
  • Protection from balloon payments
  • The ability to consolidate multiple loans
  • Up to $5 million for SBA portion of loan, no limit on overall project size
  • Keep your lender or allow us to match you with one of our lending partners
  • The fee eliminations and payment subsidies offered through the Economic Aid Act are still availabe for refinance loans approved by September 30, 2021 (subject to availability), – this offers small business owners a substantial savings


How Does SBA 504 Refinancing Work?

A 504 refinance loan is set up in the same way as the standard 504: It offers low, fixed rates on loans with 20- or 25-year terms that are fully amortized.  A commercial bank provides a 1st mortgage and the SBA (through Growth Corp) provides a second mortgage.  As the small business, your contribution is typically as low as 10%, which is often covered by the equity from the property itself. If that’s not possible, cash or other assets can be used.

You can refinance up to 90% of the current appraised value of the property. If eligible business expenses are being refinanced along with property, the maximum proportion is 85%. Another option available is cashing out up to 20% of the building’s value for business expenses, such as operating costs, employee wages and inventory.


Cash Out for Working Capital 

The SBA 504 Loan Program offers business owners the opportunity to secure below-market, fixed interest rates, amortized over 25 years, for up to 90 percent of the appraised value of commercial real estate property.

Loans are administered by a Certified Development Company (CDC) such as Growth Corp and granted in conjunction with a conventional lender (usually a bank).  That way, with the 504, the borrower’s equity injection is typically much lower than traditional business loans and can help you keep more of your cash in the business rather than tied up in real estate.  Plus, existing equity in the collateral often fulfills the down payment requirement.



504 Loans:  A Powerful Tool for Strengthening and Growing Your Business

Refinancing your commercial mortgage with an SBA 504 loan can help you free up trapped capital and enjoy lower monthly payments due to the low, long term, fixed interest rate.  An SBA 504 loan can also be used to:

  • purchase land or buildings
  • construct, upgrade or renovate buildings
  • purchase equipment with a service life of ten years or more

SBA 504 loans are a very powerful tool, yet they remain under-utilized because many small business owners just aren’t aware this financing option exists.  In FY2020, 504 loans helped fuel $5.8 billion in new capital investments for 7,000 businesses throughout the U.S.


Small businesses can refinance debt, reduce a line of credit or payables and obtain working capital using a 504 Refinance Loan


Will My Project Qualify?

If you answer “yes” to the following questions, your project will likely qualify for the 504 Refinance Program.

  • Is the loan to be refinanced at least 6 months old?
  • Is the property being refinanced at least 51% owner-occupied or long-term equipment?
  • Was the debt to be refinanced originally used for the purchase/improvement of fixed assets?


Why Growth Corp?

We know your success depends on having access to expansion capital that is both affordable and accessible.  Our experienced staff takes pride in making a difference in the lives of small business owners and their employees.  Start-ups to seasoned businesses and everything in between can benefit from working with Growth Corp.  Here’s why:

  • We’re the #1 SBA 504 Lender in Chicago and Illinois.  Growth Corp also consistently ranks as one of the top ten SBA 504 Lenders nationwide.
  • We’re the largest SBA 504 Refinance Lender in the country.
  • SBA recognized Growth Corp as an Accredited Lender after a thorough review of its policies, procedures and prior performance.  The prestigious ALP status grants Growth Corp increased authority to process and close 504 loans, which provides expedited processing of loan approvals and closings.
  • We simplify the loan approval process.  Our team coordinates the entire process from application through closing, funding and servicing, making it seamless for you and your bank lender.
  • We are SBA 504 Experts.  Our responsive and educated staff focuses almost exclusively on SBA 504 loans.  We’ve got the process down to a science!
  • We’ve worked with thousands of businesses, spanning various industries.  That means, there’s not much we haven’t seen.  Your goals, project structure and business type will likely be familiar to us and we’ll understand your unique situation.
  • Our mission is to advocate for small business.  We love our communities and believe small business is the foundation of their economic prosperity.  We will do all we can to support you and your business goals.  Connect with someone from our lending team today!