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Can I Refinance an Existing 504 Loan with a 7(a) Loan?

Under SOP 50 10 5(f), borrowers may be able to refinance their 504 loan if they meet certain criteria. Although still not as widely known to borrowers as one might expect, as of the January 1, 2014, refinancing has been possible, if:

(i) the transaction is used to refinance eligible business debt;
(ii) the new installment amount is be at least 10 percent less than the existing installment amount(s), and
(iii) the lender’s loan file includes an analysis of the rationale for the transaction and either:

(a) Both the Third Party Loan and the 504 loan are being refinanced;


(b) The Third Party Loan has been paid in full and the 504 loan needs to be refinanced as part of a larger transaction to provide funding for expansion of or renovations to the Project Property.

There is little question that SBA 50 10 5(f) represents a positive change in traditional SBA policy that has the potential to help many borrowers. If you did not already know this was an option, now you do.