Can I refinance commercial real estate with an SBA loan?
Yes, SBA 7(a) and 504 can refinance existing debt on a building your business occupies at least 51 percent of, typically up to 85 to 90 percent of appraised value, and 504 refinances can include cash-out for eligible business expenses. The existing loan generally needs to be at least two years old, current, and the refinance must produce a benefit such as a lower payment, a longer term, or a fixed rate.
What qualifies
| Requirement | Typical standard |
|---|---|
| Occupancy | Your business occupies 51 percent or more |
| Existing debt | Commercial real estate loan, typically at least 2 years old and current for the last 12 months |
| Benefit | Lower payment, longer amortization, fixed rate, or removal of a balloon |
| Loan-to-value | Up to 85 to 90 percent on a straight refinance; 75 to 85 percent with cash-out |
| Cash flow | Business covers the new payment by 1.15 to 1.25 or more |
| Credit | Around 680 and up |
Ranges vary by lender and program rules, which change periodically.
7(a) refinance
A single loan that pays off the existing mortgage and can add working capital, equipment, or other business debt into one payment on a term up to 25 years. Useful for consolidating several loans. Usually variable rate.
504 refinance
The bank first plus the CDC second structure applied to existing debt. The CDC piece is fixed for 20 or 25 years, which is the reason most borrowers refinance into 504: converting a five-year balloon or a variable-rate bank loan into long-term fixed debt.
Cash-out under 504. Eligible business expenses such as salaries, rent, utilities, inventory, and other operating costs can be included up to a percentage of the appraised value, subject to current program limits. It is not a personal cash-out.
Refinancing hard money or a bridge loan
If the current loan is a short-term loan you used to buy or improve the building, an SBA refinance can be the exit, provided the occupancy rule is met and the business cash flow supports the payment. The two-year seasoning requirement on the existing debt does not always apply to short-term loans; ask the lender about the current rule.
What the refinance costs
SBA fees of two to three percent on the guaranteed or CDC portion, usually financed, plus appraisal, environmental, title, and legal. Prepayment penalties on the existing loan are your cost; weigh them against the savings.
A worked example
$1.5 million balance on a bank loan at 8.5 percent with a balloon in 18 months, building appraised at $2.4 million. A 504 refinance at 85 percent produces $2.04 million of capacity: $1.5 million pays off the loan, and up to the program's cash-out limit funds eligible business expenses. The CDC portion locks a fixed rate for 25 years and the balloon disappears.
How CommFi handles it
Our lending desk reads the existing note, the occupancy, and the business financials and tells you whether 7(a) or 504 fits and how much the refinance can produce. SBA loans fund through approved lenders, so the desk searches a database of 7,000+ lenders and puts the file in front of the ones active in SBA refinances, and they compete. Zero upfront fees.
Related reading
Related questions
- Can I refinance a commercial mortgage with an SBA loan?
- Yes, on a building your business occupies at least 51 percent of, when the refinance produces a benefit such as a fixed rate or a lower payment.
- Can I take cash out with an SBA refinance?
- Under 504, cash-out for eligible business expenses is allowed within program limits. It is not for personal use.
- How much can I refinance with an SBA loan?
- Typically up to 85 to 90 percent of appraised value on a straight refinance, less with cash-out.
- Can an SBA loan refinance a hard money loan on my business's building?
- Often, yes, when the occupancy rule is met and the business cash flow supports the payment. Seasoning rules differ for short-term debt.
- Does the existing loan need to be a certain age to refinance with SBA?
- Generally at least two years old and current for the last twelve months, with exceptions for certain short-term loans.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.