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SomerCor’s Five Lender FAQ’s About the SBA 504 REFI

The 504 REFI is a trusted, strategic debt restructuring solution. First launched as a pilot program in response to the Great Recession from 2010 to 2012, the program was so effective it became a permanent SBA lending option in 2016. 

Here are SomerCor’s Five FAQ’s about the SBA 504 REFI to help lenders and their small business clients access this financing tool:

What are the key features of the SBA 504 REFI without expansion structure?

  • Maximum 90% LTV with no cash-out, or
  • Maximum 85% LTV with cash-out for eligible operating expenses (cash-out ranges up to 20% of the appraised value of the property) 
  • Bank has first mortgage on the project property

What debt is eligible for the SBA 504 Debt Refinance without expansion? 

On July 29, 2021 the Small Business Administration published Interim Final Rule 021-15975, outlining enhancements to the SBA 504 REFI program:

  • Loan incurred at least 6 months prior to 504 REFI application date
  • Loan secured by eligible fixed assets for at least 6 months
  • At least 75% of loan proceeds were used toward 504 eligible asset acquisition, construction or improvement – i.e. land, buildings, machinery, and equipment
  • Borrower payment history on loan is reviewed during CDC credit analysis process and payment transcripts for the prior 12 months must be submitted with application
  • May include debt subject to a federal guarantee, such as an SBA 7(a) or 504 loan – learn more about refinancing government guaranteed debt by downloading SomerCor’s webinar on the enhancements to the REFI program

What are the borrower benefits of the SBA 504 REFI?

  • Lower monthly mortgage payments
  • Fixed 20 or 25 year below-market interest rate 
  • Payment predictability
  • The option to leverage built-up equity and take cash out for eligible expenses

What expenses are eligible uses for cash-out funds?

  • Salaries (non-owners)
  • Rent
  • Utilities
  • Inventory
  • Business line of credit or business credit card debt
  • Capital expenditures, personal expenses and acquiring a new business or business partnership buyout are ineligible

What type of business is eligible to participate in the SBA 504 Refi program?

  • For-profit business located in the United States
  • Under $15 million in tangible net worth
  • Prior 2 years average after tax net income under $5 million

This debt restructuring tool is a good fit for all these industries and more:

  • manufacturing
  • warehouse/logistics
  • health care
  • professional services
  • hospitality
  • retail
  • franchises
  • senior care facilities
  • education & child care

Download the program flyer and connect with a member of SomerCor’s loan origination team to learn more about how the SBA 504 loan program supports improved cash flow for small businesses.

Contact Us

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Margaret Griffin

EVP, Chief Lending Officer
(312) 360-3320

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Eric Bacon

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Darin Gehrke

SVP Market Lead for Central and Southern Illinois
(217) 793-1075

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Elisabeth Williams