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Commercial Real Estate - Equipment - Expansion - Refinance
Does My Business Qualify?
Eligible businesses must:​
 
  • Be a for-profit company
  • Located in the United States
  • Be an operating company
  • Demonstrate need for credit
  • Meet an economic development objective
Ineligible businesses include:​
 
  • Not-for-profit businesses
  • Developers
  • Financial institutions
  • Restricted patronage
  • Gambling facilities
  • Apartment buildings
What Expenses Qualify?
Eligible Expenses:​
 

  • Purchase of land and existing building

  • New building construction

  • Leasehold improvements and furniture and fixtures

  • Eligible debt refinancing 

  • Purchase of machinery and equipment

  • Soft costs (architectural and engineering, appraisal, environmental investigations, points, fees, interim interest)

Ineligible Expenses:​
 

  • Accounts receivable

  • Working capital

  • Franchise fees

  • Equipment or furnishings with less than a 10 year useful life; unless essential to and a minor part of the project which shall not affect the weighted average maturity

SBA 504 Debt Refinance Without Expansion
Key Points:
​

  • Project can not involve any expansion to the business

  • Business must be in operation for at least 2 years

  • Existing FTE jobs can be counted as jobs retained by the financing project

  • No cash-out: 90% LTV

  • Cash-out: 85% LTV

    • Cash-out for Eligible Business Expenses (EBEs) is limited to < 20% of the appraised value​

    • EBEs include accrued expenses payable over the next 18 months (salaries, utilities, rent), inventory, etc

    • EBEs do not include capital expenditures, personal expenses, business acquisition, partner buy-out, etc.

  • Property being refinanced at least 51% owner-occupied or is long-term equipment

  • Appraisal dated within 12 months

  • Must still meet other SBA eligibility guidelines

Qualified Debt:
​​

  • Incurred and be secured by an Eligible Fixed Asset for not less than 6 months prior to date of application 

  • 100% incurred for the benefit of small business seeking the financing

  • 85% or more of the loan proceeds of the original loan were used for 504 eligible purposes

  • May consist of a combination of two or more loans

  • Can be a government guaranteed loan (7a, 504, USDA) if:

    • The refinancing will provide a substantial benefit (minimum 10% savings)​

    • For existing 504 loans, third party loan and 504 must be refinanced or the third party loan must be paid off

    • For existing 7a loans the lender must certify that it is unable to modify the terms of the existing loan

SBA 504 Debt Refinance With Expansion
Key Points:
​​
  • Debt refinance is allowed for up to 100% of the expansion costs of the project (no requirement on the age of the debt)
  • No cash-out option
  • Borrower has been current on payments for at least 1 year prior to date of application
  • Refinance must provide a Substantial Benefit to the small business:

    • Minimum10% improvement on debt refi portion of payment

    • Prepayment penalties, financing fees, and other financing costs must be added to the amount being refinanced in calculating the percentage reduction

    • Loans with balloon payments automatically meet the Substantial Benefit test

    • Loans with seasonal payments can be averaged over 12 month period

Qualified Debt:
​ 

  • 100% incurred for the benefit of small business seeking the financing

  • 85% or more of the loan proceeds of the original loan were used for 504 eligible purposes

  • Can be a government guaranteed loan (7a, 504, USDA) if:

    • The refinancing will provide a substantial benefit (minimum 10% savings)​

    • For existing 504 loans, third party loan and 504 must be refinanced or the third party loan must be paid off

    • For existing 7a loans the lender must certify that it is unable to modify the terms of the existing loan

  • Must still meet all other SBA eligibility guidelines

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