504 Refi Requirements

Refi 504 deals must meet the following requirements:

  • Applicant has been in operation for more than 2 years, supported by financial statements
  • Debt must be current for a minimum of 1 year
  • Debt being refinanced is “Qualified Debt”
    • Commercial loans (non-government debt)
    • Debt has to be 2 years old prior to the date of application
    • The debt refinance must be for the benefit and advantageous to the business
    • Substantially all (85% or more) of the proceeds of which must have been used for 504 eligible purposes to acquire, construct or improve long-term fixed assets, such as real estate and equipment
    • Financing for fees such as; prepayment penalties, appraisal costs and other professional soft costs are eligible (if supported by appraisal)
  • 10%- 15% contribution may be satisfied by equity in eligible fixed asset(s) or by the equity in any other fixed asset(s) that are acceptable to SBA as collateral for refinancing the project or additional cash
  • Appraisal must substantiate the project and the appreciated value will be counted towards the equity requirement
  • Some “Business Operating Expenses” are eligible with appropriate documentation (e.g. copies of utility bills, payroll receipts cancelled checks evidencing rent payment, business credit card bills, minor renovations)
  • Loan-to-Value Limitations (LTV):
    • Max 90% LTV on Projects refinancing only Qualified Debt or Other Secured Debt
      • If more, the borrower must provide additional cash or other fixed collateral so as not to exceed 90%
    • Projects that include the financing of “Business Operating Expenses” a max LTV of 85% applies.
      • Business Operating Expenses can be up to 20% of appraised value
  • Job Creation or Job Retention Goals apply – Matching those of the regular 504 Program

Third Party Lender Requirements:

  • Must be equal to or greater than the 504 Net Debenture Proceeds