Refinancing business debt can provide companies with much-needed financial relief, lower monthly payments, and improved cash flow. One of the most effective options for refinancing fixed assets is the 504 SBA loan program. Designed for small businesses looking to refinance existing commercial real estate or equipment loans, the 504 SBA program offers long-term, fixed-rate financing with favorable terms. Understanding how this program works and its eligibility requirements can help business owners make informed financial decisions.
How 504 SBA Refinancing Works
The 504 SBA refinancing program allows small business owners to restructure debt tied to fixed assets, such as commercial property or equipment. This program offers lower interest rates and extended repayment terms, helping businesses reduce their monthly financial burden. Unlike traditional refinancing, a 504 SBA loan involves three parties: a private lender, an SBA-approved Certified Development Company (CDC) like MCDC, and the borrower. The private lender typically covers 50% of the loan amount, the CDC contributes 40%, and the borrower provides at least 10% equity.
Eligibility Requirements
To qualify for 504 SBA refinancing, businesses must meet specific criteria set by the Small Business Administration (SBA). According to the SBA, to be eligible for a 504 loan, your business must have a tangible net worth of less than $15 million. Additionally, the business must occupy at least 51% of the property being refinanced if it is an existing structure. The original debt must have been incurred for commercial real estate or equipment at least two years prior to applying for refinancing. Businesses must also demonstrate that the refinancing will improve their financial position.
Benefits of 504 SBA Refinancing
Refinancing through the 504 SBA program offers several advantages, including lower fixed interest rates, longer repayment terms of up to 25 years, and reduced monthly payments. These benefits allow businesses to free up working capital for expansion, hiring, or operational improvements. Unlike variable-rate loans, which can lead to unpredictable costs, a 504 SBA loan provides financial stability with consistent, manageable payments.
MCDC specializes in helping small businesses navigate the 504 SBA refinancing process. If you’re looking for a way to reduce your financial burden and improve cash flow, our team can guide you through the application and approval process to ensure the best possible refinancing solution for your business. Reach out today to get started!