Can I Refinance My Business Mortgage With an SBA Loan?

One of the best outcomes you can hope for as a small business owner is to one day own your own building. If you’ve already financed your building purchase, but want to explore financing options that better suit your small business, refinancing your current loan with SBA loan might be your best option. Refinancing your current mortgage with an SBA loan can free up capital to help with new equipment or business expenses, and it can potentially give you access to a larger loan amount for renovations to your building.

What is a 504 Loan and How Does it Help Me Refinance My Business Mortgage?

The SBA 504 program offers you the opportunity to secure below-market, fixed interest rates, amortized over 20 years, for up to 90% of the appraised value of commercial real estate property. Loans are administered by a Certified Development Company (CDC) such as TMC Financing, and granted in conjunction with a conventional lender, who provides 50% of the total loan amount. Your CDC facilitates the SBA loan for up to 40%, or $5 million at a fixed, below-market rate.

Refinancing your conventional debt with an SBA 504 loan can help you free up trapped capital and enjoy lower monthly payments  due to the low, long term, fixed interest rate. The 504 loan only requires a 10% injection (in the majority of cases), which is often covered by the equity itself . This injection  is typically much lower than traditional business loans, and can help you keep more of your cash in your business rather than tied up in real estate.

  • 50% Conventional lender
  • 40% CDC
  • 10% Borrower

An SBA 504 loan can also be used to:

  • purchase land or buildings
  • construct, upgrade or renovate buildings
  • purchase equipment with a service life of ten years or more

This program could not only enable you to refinance your building, but also take cash out to cover other qualified business expenses, such as salaries, rent, utilities, and inventory. Up to 20% of the appraised value can be taken out as cash for these business expenses.

What are the Requirements to Refinance my Business Mortgage?

Financing professionals generally recommend that you consult a list of requirements prior to beginning the loan refinancing application, so what are the SBA’s requirements for refinancing your current loan? The good news is that nearly any owner-occupied property will qualify, as long as over half of the property is owner-occupied and you meet the rest of the SBA guidelines at the time of your application. You must also meet the following criteria:

  • Business and existing loan must be at least 2 years old (loan payments must not be more than 30 days past due in past 12 months)
  • At least 85% of existing conventional loan must have been for SBA 504-eligible purposes
  • Loan must not be subject to a federal agency guarantee (existing SBA 504 or 7(a) loans are not eligible)
  • Other assets can be used as collateral to get to 90% LTV
  • Up to 20% of the appraised value can be used for cash out for other business expenses (salaries, rent, utilities, inventory or other obligations of the business)
  • Appraisal is not due at application, but will be required for funding

The SBA website does have additional resources regarding this subject matter as well. The requirements and application might seem rigorous but your CDC (like TMC Financing) is there to guide you through the entire process. The end result will put more money into your business and less on financing. The SBA offers better interest rates along with lots of loan flexibility. The current 504 refi loan rate is 4.68%, as of January 2018.

If you have questions about these requirements or wonder how they might impact your eligibility, reach out to TMC Financing for guidance. You can even prequalify to see exactly how much you can expect to get from a 504 loan before officially applying.  

You can find out more about refinancing your business mortgage from one of TMC Financing’s 504 loan experts. TMC is an SBA Premier Certified Lender and a high-volume loan provider. With over 35 years of experience, TMC can help you find the financing that is best for your refinancing needs and guide you through the 504 loan process. Contact TMC Financing today.


Barbara Morrison, a local small business advocate and civic leader, founded her first company TMC Financing in 1981. TMC is a Certified Development Company that provides commercial real estate financing to small business owners via the SBA 504 Loan Program. TMC consistently ranks among the top certified development companies nationwide, and has funded projects worth more than $9 billion across California and Nevada. Nearly 5,000 small businesses have benefitted from this financing, resulting in the creation of an estimated 50,000 jobs. TMC is also the No.1 SBA 504 hotel lender in the United States. Barbara is also the founder of Working Solutions, a Bay Area microlender whose mission is to provide micro entrepreneurs, particularly low-income individuals, women and minorities, with the access to capital and resources they need to start a successful business.
Barbara Morrison