SBA 504 Refinance/Working Capital Loans
SBA 504 REFINANCE / WORKING CAPITAL APPLICATION REQUIREMENTS
- Personal Financial Statement for each owner, proprietor, partner or stockholder with 20% or more ownership.
- Personal Tax Returns for 1 year for each owner, proprietor, partner or stockholder with 20% or more ownership.
- Tax Returns for the previous 2 yrs for the operating company.
- Interim Balance Sheet, Income Statement, accounts payable and receivable agings (if applicable) dated within 90 days of the application.
- For a new business, provide a proforma balance sheet, projected income statement and a monthly cash flow analysis for the first 12 months of operation with a detailed description of assumptions.
- Copy of key cost documents, such as purchase & sale agreement, contractor cost estimates, vendor quotes for machinery & equipment.
Advantages of an SBA 504 Refinance/Working Capital Loan
The Program: SBA 504: **Below Market, Fixed Rate, 25, 20 or 10-Year Term**
- Commercial loans for businesses acquiring fixed assets
- Fixed rate below-market financing
- Financing for real estate, equipment and refinance of renovation/expansion projects
- Term of 20 or 25 years for real estate; 10 years for equipment
- The assets may be owned by a separate entity
Advantages of SBA 504: **Up to 90% Financing**
- Long-term, below-market, fixed rate financing
- Equity requirement as low as 10% for Borrower
- Borrower can obtain up to 90% financing
- Bank can participate in larger transactions
- Bank benefits from a first lien at 50% LTV
- Bank sets its own interest rate and fees
- Borrower does not pay a deposit or any up-front application fee
- Borrower receives a simultaneous, expedited closing with low legal fees
- **Minimum Borrower Equity**
SBA 504 REFINANCE / WORKING CAPITAL LOAN ELIGIBILITY
Eligible Business
- For profit business in operation for at least 2 years at time of application
- Must occupy at least 51% of project real estate at time of application
- Equipment must have remaining useful life of at least 10 years
Definition of Eligible Refinance
- Qualified Debt-Every 504 Refi project must have Qualified Debt
- Qualified Debt was originated at least 6-months prior to application
- 75% or more (effective 11-13-23) of the original debt must have been used for 504-eligible purposes: to acquire land, buildings, or long-term equipment or to construct or renovate buildings
- Subsequent refinancing, including cash out, of the original debt is permitted
- Payments current for prior 12 months (less than 30 days past due)
- Business Operating Expenses-Future business expenses to be incurred in the next 18 months such as payroll, rent, LOC payments, etc.
SBA 504 Structure
90% Structure:
50% Bank – First mortgage/lien
40% SBA 504 – Second mortgage/lien
10% – Borrower Equity (cash, subordinated debt, equity in real estate)
Start-Up Business or Special Purpose Building requires 15% Borrower Equity injection
Start-Up Business and Special Purpose Building requires 20% Borrower Equity injection
Example:
| Bank | SBA/GSDC | Borrower | Total | |
|---|---|---|---|---|
| Loan Amount | $500,000 | $400,000 | $100,000 | $1,000,000 |
| % of Project | 50% | 40% | 10% | |
| Term/Amortization | 10/20 | 20/20 | Equity | |
| Interest Rate | MARKET | FIXED | ||
| Collateral | First Lien | Second Lien |
85% Structure:
- Up to 85% LTV when refinancing includes Business Operating Expenses
- Business Operating Expenses cannot exceed 20% of refinance project, i.e. appraisal
- Project is structured based on the fair market appraised value
- Loan approval can be made subject to appraisal that must be dated within 1 year of SBA loan approval
- Borrowers 15% equity represents equity in the project asset
- Bank’s loan can be less than 50% of Project, but must be at least equal to the 504 loan
May 2026 SBA 504 Interest Rates
(For loans authorized on or after 10/1/25.)
6.181%
25-Year Term
6.200%
20-Year Term
5.846%
10-Year Term