# Can a 504 refinance include operating expenses?

**Short answer:** Yes, as Eligible Business Expenses in a debt refinance without expansion. SOP 50 10 8.1, Sec. C, Ch. 1, Para. C.10 allows expenses incurred but unpaid before application or due within 18 months, inside a 90% loan-to-value limit.

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Last checked: 2026-11-08

Yes, but only in a debt refinance without expansion. The project can include Eligible Business Expenses (13 CFR 120.882(g)(6)(ii); SOP 50 10 8.1, Sec. C, Ch. 1, Para. C.10).

## What qualifies

Eligible Business Expenses are payments for Operating Expenses or Other Secured Debt.

- **Operating Expenses** were incurred but unpaid before the 504 application, or will come due within 18 months after it. Examples are salaries, rent, utilities and inventory. Capital expenditures are excluded.
- **Business credit cards and lines** can count if they are in the name of the small business and used only for business. Personal purchases must be identified and deducted.
- **Other Secured Debt** must be secured by the same Eligible Fixed Assets for at least 6 months. It must be current for the prior 12 months, and it cannot be for capital expenditures.

## The limits

- Cash from the project must exceed the payoff of the Qualified Debt.
- The project is capped at a 90% loan to value, and adding collateral cannot raise that value.
- Each expense must be itemized. A gross figure is not acceptable.
- You and the Certified Development Company (CDC) must certify the funds will cover Eligible Business Expenses.
- On request, you must substantiate the use with bank statements, paid invoices, cleared checks or similar records.

When expenses are included, the only fixed assets SBA will accept as collateral are those securing the Qualified Debt (13 CFR 120.882(g)(16)).

## Sources

- [13 CFR § 120.882](https://www.ecfr.gov/current/title-13/section-120.882)
- [SOP 50 10 8.1, Sec. C, Ch. 1, Para. C.10, Permissible Debt Refinance without Expansion (Para. C begins p. 226)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)