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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

  • Third party tenant buildout

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 required at time of application

  • Loan must be disbursed within 9 months of loan approval

  • 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

  • 75% 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 CDC must notify existing  CDC or 7a lender in writing, within 10 business days of application, advising them the existing loan is being refinanced

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 12 months 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:​

    • 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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