If you own commercial real estate with an existing mortgage, refinancing through an SBA loan could significantly reduce your monthly payments and improve your cash flow. SBA refinancing programs offer longer terms and potentially better rates than conventional commercial loans, giving business owners the opportunity to restructure debt on more favorable terms.
Benefits of SBA Refinancing
Refinancing your commercial mortgage with an SBA loan offers several advantages:
- Longer terms: Up to 25 years vs. typical 5-10 year commercial loans
- Lower payments: Extended amortization reduces monthly obligations
- Fixed rates: Lock in rates with SBA 504 program
- Cash out potential: Access equity for business improvements
- No balloon payments: Fully amortizing loans provide certainty
SBA 504 Refinance Program
The SBA 504 program includes specific refinancing provisions that make it attractive for existing property owners. The 504 refinance program allows you to:
- Refinance existing commercial mortgages
- Refinance eligible business expenses paid over the past 24 months
- Cash out up to 25% for working capital or business expansion
SBA 7(a) Refinance Options
The 7(a) program can also be used for refinancing when it provides clear benefit to the borrower. Common scenarios include:
- Reducing interest rate or monthly payment
- Extending maturity date
- Eliminating balloon payment
- Converting variable rate to fixed
- Consolidating multiple business debts
Qualification Requirements
Property Requirements
- 51% or more owner-occupied (existing building)
- Property must be used for business operations
- Current on existing mortgage payments
- Property in good condition
Business Requirements
- Operating and profitable business
- Good credit history (650+ score preferred)
- Demonstrated ability to service new debt
- Business operating for at least 2 years
When Refinancing Makes Sense
Balloon Payment Approaching
If your current loan has a balloon payment coming due, SBA refinancing provides a fully amortizing alternative. You'll avoid the risk of rate changes or qualification challenges at balloon maturity.
High Interest Rate
If you locked in during a high-rate environment, current SBA rates may offer savings. Even small rate reductions translate to significant savings over a 25-year term.
Short Amortization
Many commercial loans have 15-20 year amortization despite 5-10 year terms. SBA's 25-year amortization can substantially reduce monthly payments, improving cash flow.
Need Working Capital
The 504 refinance program allows cash out for legitimate business purposes. If you have equity in your property and need capital for expansion or improvements, refinancing can access that equity.
See If SBA Refinancing Can Lower Your Payments
Get a free analysis of your refinancing options.
Check Your EligibilityRefinancing Example
Consider this refinancing scenario:
Current Loan
- Balance: $800,000
- Rate: 8.5%
- Term: 5 years remaining
- Amortization: 20 years
- Monthly payment: $6,944
- Balloon due in 5 years
SBA 504 Refinance
- Amount: $800,000
- Blended rate: ~7%
- Term: 25 years
- Monthly payment: $5,653
- No balloon payment
- Monthly savings: $1,291
The Refinancing Process
- Application: Submit business and property information
- Appraisal: Current property valuation required
- Underwriting: Review of business financials and loan history
- Approval: SBA authorization and closing preparation
- Closing: Sign documents and fund new loan
The typical timeline is 60-90 days from application to closing, though expedited processing may be available in some cases.
Costs to Consider
Refinancing involves closing costs that should be factored into your decision:
- SBA guarantee fee (varies by loan size)
- CDC processing fee (504 program)
- Appraisal fee
- Title insurance
- Legal fees
- Prepayment penalties on existing loan (if any)
For most borrowers, the long-term savings from lower payments far exceed refinancing costs, but run the numbers carefully to ensure the refinance makes financial sense for your situation.