Can a 504 loan refinance an SBA loan or the bank's own debt?
Short answer
Yes, under conditions. An existing 7(a) or 504 loan needs lower payments and written notice to the current holder. Same-bank debt needs SBA's approval and the bank's certification that no potential loss shifts to SBA. Source: SOP 50 10 8.1, Sec. C, Ch. 1, Paras. C.10-C.11.
Yes. Both are allowed, with extra conditions on each.
Existing SBA-guaranteed loans
- With expansion, a 7(a) loan can be refinanced in whole or in part. A 504 loan can be refinanced only in whole (SOP 50 10 8.1, Sec. C, Ch. 1, Para. C.11; Para. C begins p. 226).
- An existing 504 loan qualifies only if the third party loan is refinanced with it or already paid in full.
- The Certified Development Company (CDC) must notify the current CDC or 7(a) lender in writing at least 10 business days ahead.
- New payments on the refinanced portion must be lower than the existing payments. Prepayment penalties and financing fees are added first.
Same-institution debt
Same-institution debt is debt of the CDC or third party lender financing the new project, or of an affiliate. Source: 13 CFR § 120.882(e)(8).
- A CDC in the Premier Certified Lenders Program cannot use its delegated authority. SBA must approve the loan.
- The third party lender must certify it is not in a position to sustain a loss that shifts to SBA (Para. C.10; Para. C.11).
- On the no-expansion route, that third party loan cannot be sold in an SBA-guaranteed pool (13 CFR § 120.882(g)(13)).
On the no-expansion route, the third party lender must also certify it would not refinance without 504 assistance (13 CFR § 120.882(g)(14)).
Debt that is barred
A 504 project cannot refinance debt owed to an Associate, an Small Business Investment Company (SBIC) or a New Markets Venture Capital Company (Para. C.10; Para. C.11).
Ask lending partners about your loan
Tell us the amount you need and what it is for. We refer you to lenders that may fund businesses like yours, and it costs you nothing.
Janover Capital LLC is not a lender and is not the SBA. The lender makes the credit decision. A lender or marketplace may pay us a referral fee if we connect you, at no cost to you. Advertiser disclosure.