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New SBA 504 Rules Unlocked Millions In Financing Capability
90% financing + 25-year fixed rates + unlimited working capital access
Shaun Tiwari
September 04, 2025 • Estimated Reading Time: 7 minutes
Everyone's been talking about the major SBA rule changes that took effect in June 2025 – the new citizenship requirements, franchise directory reinstatement, and tightened underwriting standards. But there's another significant SBA rule change that happened in November 2024 that's flying under the radar, and it could be even more impactful for your business financing strategy.
While the June changes focused on who can get SBA loans, the November 2024 updates to the SBA 504 program fundamentally changed how much capital you can access and how flexibly you can use it. These changes have quietly unlocked millions in acquisition capital and refinancing opportunities that most business owners don't even know exist yet.
The Big Restrictions That Were Finally Eliminated
The 50% Refinancing Cap is GONE
Previously, Certified Development Companies (CDCs) could only use 50% of their annual loan approvals for debt refinancing without expansion. This arbitrary cap created bottlenecks and forced qualifying businesses to wait.
Now: This cap has been completely eliminated, allowing CDCs to approve significantly more refinancing loans.
The 10% "Substantial Benefit" Test Removed
Under old rules, refinancing had to demonstrate at least a 10% payment reduction. In today's rate environment, this was often impossible even when refinancing made strategic sense.
Now: Businesses can refinance for other benefits like predictable fixed rates, improved cash flow, debt consolidation, or accessing equity – without proving specific payment reductions.
Loan-to-Value Restrictions Relaxed
Previously: 85% LTV cap for cash-out projects, with eligible business expenses limited to 20% of asset value.
Now: 90% LTV across the board, with no cap on eligible business expenses within LTV limits.
The Expanded Eligibility Requirements
"Substantially All" Standard Simplified
The threshold for eligible debt dropped from 85% to 75%. Now a $2 million acquisition where $1.5 million went to real estate/equipment qualifies for 504 refinancing.
Expanded Eligible Business Expenses
New additions include:
Working capital lines of credit
Business credit cards (business use only)
Other secured debt (vehicle loans, equipment financing)
Operating expenses: salaries, rent, utilities, inventory
Example: A manufacturer can refinance their building mortgage, include equipment financing, consolidate business credit cards, AND access 60 days of payroll – all in one 504 loan with 25-year fixed rates.
How This Unlocks Acquisition Capital
The New Structure Advantage
Traditional challenge: Business acquisitions required multiple lenders with different terms, creating complexity and higher costs.
New 504 advantage: 50% bank loan + 40% SBA 504 debenture + 10% buyer equity
Real scenario: $4.5 million business acquisition
Bank loan: $2.25 million (5-7 year term)
SBA 504: $1.8 million (fixed ~5.8%, 25-year term)
Buyer investment: $450,000
The Cash-Out Game Changer
Here's the transformation: You're buying a business with a $2 million building that now appraises for $2.2 million.
New 504 approach:
Finance 90% of $2.2 million = $1.98 million
Use $1.8 million for acquisition
Access $180,000 for operations, equipment, or inventory
This "trapped equity release" provides working capital without separate financing.
Strategic Two-Step Approach
Smart acquirers now use:
Initial purchase: Conventional financing to close quickly
Strategic refinance: 6-12 months later with 504 for better terms
Strategic Applications for Business Buyers
Manufacturing & Equipment-Heavy Businesses
25-year terms vs. typical 5-7 year balloons
Fixed rates (~5.8% vs. 8-10% conventional)
Equipment inclusion in the same low-rate package
Service Businesses with Real Estate
Debt consolidation into predictable payments
Cash flow improvement enabling reinvestment
Multi-location expansion using existing equity
Portfolio Growth Strategy
Established businesses can use existing real estate equity for expansion through cross-collateralization and portfolio refinancing.
What Business Owners Need to Know Now
Current Status
Rules effective November 15, 2024. Most CDCs can process under new rules, though some procedures are still being finalized.
Additional June 2025 Requirements
100% U.S. ownership required
Franchise businesses must be in SBA Franchise Directory
Enhanced documentation for citizenship verification
Action Steps
Assess current debt for refinancing opportunities using 90% LTV
Identify acquisition targets with real estate components
Connect with experienced CDCs early in planning
Consider timing – structural advantages remain compelling despite rate fluctuations
Choose the Right CDC
Look for:
Track record with acquisition financing
Understanding of new rules
Bank relationships experienced in 504 lending
Speed in processing
The Bottom Line: A Historic Opportunity
The November 2024 changes represent the most significant expansion of small business acquisition financing in decades. By removing artificial caps, increasing LTV limits, and expanding eligible uses, the SBA created unprecedented opportunities.
The numbers:
90% financing vs. typical 70-80% conventional
25-year fixed terms vs. 5-7 year balloons
Sub-6% rates vs. 8-10% conventional
Unlimited eligible expenses vs. previous 20% cap
This combination of expanded access, flexible terms, and competitive rates creates conditions that may not be available again for years. Smart business owners will use this window not just to grow, but to build more resilient, cash-efficient operations positioned for long-term success.
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