# SBA 504 Refinance Program Updates (50 10 7.1)

- Link: https://johnmorelli.us/sba-504-refinance-program-updates-50-10-7-1/
- Published: 2024-10-10T20:58:54+00:00
- Author: John Morelli

New regulations, effective November 15, 2024, will make SBA 504 Refinance loans 
more accessible to small businesses by updating eligibility criteria and refining
previous requirements.

##### Here’s a glance at what’s changing:

 * **Increased Loan-to-Value**: Now up to 90% for debt refinancing without expansion,
   including cash out for Eligible Business Expenses (like working capital).
 * **No Cap on Eligible Business Expenses**: The 20% limit on Eligible Business 
   Expenses (EBE) has been removed, providing greater flexibility.
 * **Revised 10% Substantial Benefit Test:** Now, any savings on the proposed new
   payments is sufficient for refinancing other government debt.
 * **Expanded Eligible Business Expenses:** Certain “other secured debts” now qualify
   as Eligible Business Expenses in 504 refinancing without expansion.
 * **Flexible Asset Use Requirements:** Only 75% of the original loan needs to have
   been used for Eligible Fixed Assets for both 504 refinancing programs.

These changes can help you grow your business with lower debt burden and improved
cash flow.

##### Recap of Previous SBA 504 Refinance Updates from 2023

 * Businesses can qualify for the SBA 504 _Refinance Program_ when **75 percent**
   of the original loan was used for 504 eligible assets (the previous requirement
   for cash-out projects was 85%).
 * No need to wait 6 months to avoid a personal guarantee
 * A stronger guarantor can be substituted for a weaker one – allows for familial
   guarantees to strengthen the cash flow of a transaction.
 * If more than one owner, only the 20% owners up to 51% of the ownership is required
   to guarantee – no social security numbers or data is required to be collected
   from the minority ownership
 * The SBA will no longer require a letter from the existing lender, streamlining
   and simplifying the refinance process. (_Note: when the loan has been submitted
   to the SBA for approval, the existing lender must be notified within 10 business
   days_.)
 * Simplification of Affiliation rules
 * No more Franchise Directory
 * Reduced factors for determining creditworthiness
 * Character Clearances
 * Businesses can qualify for the SBA 504 Refinance Program when **75 percent** 
   of the original loan was used for 504 eligible assets (the previous requirement
   was 85 percent).

##### Procedural Changes

 * The **SBA will no longer require permission from the original lender**, streamlining
   and simplifying the refinance process.

To find out if refinancing with the SBA 504 Refinance Program makes sense for you
and your business, get in touch with us today.