Can an SBA 504 loan be used to refinance existing debt?
Small businesses have 2 different options for refinancing existing debt through the SBA 504 loan program:
SBA 504 Refinance with Expansion – businesses that are needing financing for an expansion such as purchase of new real estate, renovations of existing real estate, or purchase of long-term equipment may be eligible to refinance existing debt for 504 eligible fixed assets in conjunction with the expansion project.
The amount of refinance is limited to 50% of the amount of the expansion project. This can help consolidate debt, extend loan terms, and reduce payment amuonts for the existing debt by rolling it into a new long-term 504 loan.
SBA 504 Refinance (No Expansion) – also known as “straight refinance” – businesses can refinance existing debt for 504 eligible assets such as real estate and equipment.
By refinancing, the business can take advantage of longer terms, and below-market fixed interest rates on a portion of the financing.
Under this option, the business can also “cash out” equity for interest rate, turn equity into business operating capital – all key components to improving cash flow of the business.