When it comes to running a business, debt usually comes with the territory. Sometimes it takes borrowing money to make money, but where many businesses struggle is with the kind of debt they incur. High interest rates and large loan payments can make it harder to turn a profit, slowing your business’s growth. Too much debt can also hurt your ability to borrow, since many banks won’t lend to businesses that have too much debt in the first place.

This is where debt refinancing can help. Specifically, for small businesses in need of relief from high-interest loans, the Small Business Administration’s (SBA) 504 Loan Refinance Program has helped pave the way for economic progress and job growth across the United States. The basic tenants are simple: with an SBA 504 Refinance Loan, business owners can borrow up to 90% of the current appraised value of their property. This works by the private lender (a bank) providing a loan for 50-percent of the total project cost and a Certified Development Company (CDC) providing an SBA-backed loan for 40-percent, thus leaving only 10-percent in upfront equity to the business owner.

Certified Development Companies (CDCs) are non-profit organizations that facilitate the SBA Loan Programs, helping businesses through the entire loan process and ensure the process is streamlined, efficient and stress-less for the business owner. Working directly with the private sector lenders and business owners, CDCs are designated and regulated by the SBA to aid in economic growth in local communities and helping businesses grow and create more jobs.

How do you qualify for an SBA 504 Refinance Loan? What is qualified debt?

To qualify for an SBA 504 Refinance Loan, your business must be a for-profit, US-based business. There are a few other qualifications that a CDC can help you identify to ensure your business is eligible, such as business cash flow, net profit and net worth, and business liquidity.

The qualifications for the SBA 504 Refinance Loan also stipulate that the to-be-refinanced loan(s) be no less than two years old, 85-percent of the loan must have been used to acquire real estate or equipment, business owner must occupy at least 51% of the project real estate, the commercial loan(s) cannot be pre-existing federally-guaranteed loan(s) and it/they must be current for the last 12 months.

The SBA 504 Refinance Loan is open to almost any small businesses that qualifies under the SBA’s size requirements and is available every geographic zip code in the US (including Puerto Rico and the Virgin Islands).


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