The SBA 504 loan program is one of the best-kept secrets in commercial real estate finance — offering below-market fixed rates, 90% LTV, and 20–25 year terms for owner-occupied commercial properties. If you occupy at least 51% of your commercial property, SBA 504 refinancing may be the most favorable option available to you.
What Is an SBA 504 Loan?
The SBA 504 program is a government-backed financing tool designed to help small businesses purchase or refinance owner-occupied commercial real estate and major equipment. It’s structured as two loans working together:
- First mortgage (50% of project cost): Provided by a bank or conventional lender at market rates
- Second mortgage (40% of project cost): Provided by a Certified Development Company (CDC) backed by an SBA debenture at a below-market fixed rate set monthly
- Borrower equity (10% of project cost): Your down payment or equity contribution — only 10% required vs. 25–30% for conventional CRE
SBA 504 Refinance: Who Qualifies?
To refinance an existing commercial property with SBA 504, you must meet these requirements:
- Owner-occupancy: You must occupy at least 51% of the property you’re refinancing. Pure investment properties (tenants only) do not qualify.
- Business size: Your business must qualify as a “small business” under SBA standards — generally, net worth under $20M and net income under $6.5M after taxes (averaged over two years)
- Use of proceeds: Must be refinancing existing debt on the owner-occupied commercial real estate (not cash-out beyond certain limits)
- Eligible properties: Office buildings, retail/showroom space, light industrial, warehouses, medical/dental offices, restaurants, and other commercial properties where you’re the primary occupant
- U.S. business: Business must be for-profit and located/operating in the United States
SBA 504 Refinance Benefits
- Up to 90% financing: Only 10% equity required — far less than the 25–30% typically required for conventional commercial loans
- Below-market fixed rate: The CDC/SBA portion carries a below-market fixed rate for the full 20–25 year term, set monthly based on Treasury debenture rates
- Long amortization: 20 or 25-year terms fully amortize the loan — no balloon payment
- No balloon risk: One of the biggest advantages — SBA 504 loans don’t have balloon maturities. You won’t face the refinance risk that conventional CRE borrowers deal with every 5–10 years.
- Preserve capital: Low down payment/equity requirement keeps capital in the business
SBA 504 Refinance Limitations
- Owner-occupancy required: If you don’t occupy the property, 504 doesn’t apply
- Longer closing timeline: SBA 504 loans typically take 60–90 days to close, sometimes longer
- Two-loan structure complexity: You’re working with two lenders (bank + CDC), which adds complexity
- Prepayment penalty: SBA 504 debentures have a 10-year prepayment premium (declines over time)
- Personal guarantee required: SBA loans always require personal guarantees from owners with 20%+ ownership
- Job creation/retention (for some programs): Some SBA 504 programs require job creation or retention commitments
SBA 504 vs. Conventional Commercial Refinance
- LTV: SBA 504 (90%) vs. Conventional (65–75%)
- Rate: SBA 504 (below market fixed) vs. Conventional (market rate)
- Term: SBA 504 (20–25 year fully amortizing) vs. Conventional (5–10 year balloon)
- Speed: SBA 504 (60–90+ days) vs. Conventional (45–75 days)
- Balloon risk: SBA 504 (none) vs. Conventional (yes, at maturity)
How RefiLoop Helps with SBA 504 Refinances
RefiLoop (NMLS #2510864) works with SBA lenders and CDCs across our markets. We can assess whether your property and business qualify for SBA 504 refinancing and connect you with the right lending partners. We’ll also compare SBA 504 terms against conventional options so you can make an informed decision.
Frequently Asked Questions
Can I cash out equity with an SBA 504 refinance?
Limited cash-out is allowed in SBA 504 refinances under certain programs (specifically the SBA 504 Debt Refinancing Program). However, the primary use must be refinancing existing eligible debt on the owner-occupied property.
What if I only occupy part of the property?
You must occupy at least 51% of the property at the time of loan closing. If a tenant occupies more than 49%, the property doesn’t qualify. If your business is growing into more space over time, SBA 504 may still be available for new construction or expansion.
My balloon is coming due and I own my building — is SBA 504 an option?
Potentially yes, if you occupy 51%+ and meet business size standards. The key question is timeline — SBA 504 can’t close in 30 days. If you have 90+ days before maturity, it’s worth exploring. If the maturity is imminent, a bridge loan may be needed first. See our guide: Commercial Balloon Payment Coming Due.
Own and occupy your commercial property? Contact RefiLoop to find out if SBA 504 refinancing makes sense for your situation.
About David Greenbaum
David Greenbaum is a commercial mortgage broker and co-founder of RefiLoop. He specializes in helping commercial property owners refinance maturing loans between $200K and $15M across Texas, Florida, Georgia, North Carolina, Ohio, and other priority markets. With hands-on experience in commercial bridge loans, debt fund financing, and conventional CRE refinancing, David helps borrowers find the right capital source for their situation — not just the easiest one.