The quick read: The bank loan comes due on its own date, and the 504 loan keeps running. SBA rules let the bank write its first-lien loan for as little as 7 years under a 10-year 504 loan and 10 years under a 20-year 504 loan, so a 2017 project with a 20-year 504 loan and a 10-year bank note reaches its balloon in 2027 with a decade left on the 504 piece. Until that date the bank cannot call the loan unless it is in default. At maturity you have three paths: renew with the same bank, refinance only the first lien with a new lender while the 504 loan stays second, or replace both with a new 504 refinancing, which 13 CFR 120.882 allows only when both loans are refinanced or the bank loan is already paid off. The 10-year Treasury par yield read 4.98% on October 29, 2026, against a 2.05% to 2.62% range during 2017, so the new rate and the amortization you negotiate decide the new payment.
As of: October 30, 2026 (current eCFR text of 13 CFR Part 120 and Treasury daily par yields through October 29, 2026)
Minimum bank loan term: 7 years under a 10-year 504 loan; 10 years under a 20-year 504 loan (13 CFR 120.921(a))
Early call by the bank: barred unless the loan is in default (13 CFR 120.921(c))
Refinancing an existing 504 loan with a new 504: only if both loans are refinanced or the bank loan is paid in full (13 CFR 120.882(g)(3)(i))
Bank loan plus 504 loan on a refinancing: no more than 90% of the collateral's fair market value (13 CFR 120.882(g)(6)(i))
10-year Treasury par yield: 4.98% on October 29, 2026; 2.05% to 2.62% during 2017 (U.S. Treasury)
Federal funds target range: 3-3/4 to 4 percent, held on October 28, 2026 (Federal Reserve)
Why does the bank loan in an SBA 504 mature before the 504 loan?
The bank loan in an SBA 504 can mature years before the 504 loan because SBA sets only a floor on its term, at least 7 years under a 10-year 504 loan and 10 years under a 20-year 504 loan, so a bank writing the minimum puts its balloon a decade early.
Two notes finance one building. Under 13 CFR 120.801, permanent 504 financing is generally a contribution from the business of at least 10 percent of project costs, a loan funded by a CDC debenture for up to 40 percent with a second lien on the property, and a Third Party Loan for the balance with a first lien. Each note has its own term, rate and payment schedule.
The term rule is 13 CFR 120.921(a): the Third Party Loan must run at least 7 years when the 504 loan is 10 years and at least 10 years when the 504 loan is 20 years. A bank that wrote a 10-year term on a 25-year amortization left a large balance due at year ten. On a project approved in 2017 with a 20-year 504 loan, that is a 2027 balloon on the first lien while the 504 loan runs to 2037.
Until the maturity date, the rule protects you. Section 120.921(c) says the Third Party Loan must not have any early call feature or demand provision unless the loan is in default. The pressure arrives on one date you can see coming, and if your first lien matures in the next 6 to 12 months, the decision is on the table now.
What happens if the bank loan balloons before you refinance it?
If the bank loan balloons and the balance goes unpaid, the first lien is in default, and 13 CFR 120.921(c) then requires the bank to give the CDC and SBA written notice within 30 days of the default and at least 60 days before any foreclosure. Neither deadline extends your maturity date.
The same section limits what the bank can stack ahead of the 504 lien after a default. Under 120.921(e), the bank's lien is subordinate to the CDC/SBA lien for prepayment penalties, late fees, other default charges and escalated interest. Under 120.921(f), the bank cannot escalate its rate above the maximum SBA sets for Third Party Loans.
Those rules protect the CDC's position more than yours. A missed balloon still puts the building at risk, and your 504 note and the CDC's loan documents set what a first-lien default means for the 504 loan. Read both well before the balloon date.
Can you refinance only the bank loan and keep the existing 504 loan?
Yes, you can refinance only the bank first lien and keep the existing 504 loan, by renewing with the same bank or bringing in a new lender. A new lender will insist on first position, which takes a CDC-executed subordination of the 504 lien; ask the CDC whether SBA must also approve.
Renewal with the current bank is the simplest version. The lender, the lien and the 504 loan stay where they are, and the bank sets a new maturity, rate and amortization. One limit applies to new money: under 13 CFR 120.921(d), after the project is complete the bank may not make future advances under the Third Party Loan except to collect, maintain the collateral or protect its lien. A renewal that adds cash is a new credit request, not an extension.
A new lender means a payoff of the old first lien and a new first mortgage, with the 504 lien behind it under a subordination agreement with the CDC. SBA posts state-specific boilerplate agreements for 504 subordinations on its 504 Servicing Subordination Agreements page, last updated July 18, 2025. Every dollar added to the first lien sits ahead of the 504 loan, so expect the CDC to review the new loan's amount and terms before it signs. Ask the CDC what it needs and how long its review takes before you accept a term sheet.
The case for this path is that the 504 loan keeps its own note, rate and schedule. Only the bank portion is repriced, and no 504 prepayment premium comes into play.
When can a new SBA 504 loan replace both the bank loan and the old 504?
A new SBA 504 refinancing can replace both loans when, among other conditions, the business has operated for the full two years before applying and the new installments beat the old ones, because 13 CFR 120.882(g)(3)(i) lets an existing 504 loan be refinanced only if both loans are refinanced or the bank loan is paid in full.
Other parts of 120.882(g) set the structure. The money comes from three sources measured against current fair market value: a new Third Party Loan at least as large as the new 504 loan, at least 10% from the borrower (15% for a limited or single purpose building), and no more than 40% from the 504 loan. The bank loan and the 504 loan together may cover no more than 90% of the value of the fixed assets securing them. The new bank takes the first lien and the new 504 loan the second.
The test that decides it is substantial benefit. Under 120.882(g)(3)(iii), the portion of the new installment attributable to the debt being refinanced must be less than the existing installment amounts, after adding prepayment penalties (including subsidy recoupment fees), financing fees and other costs to the amount refinanced. The test compares payments, not rates, so a longer amortization on the new loans can pass it even when today's rates are higher than 2017's. Exceptions can be approved by SBA's Director of the Office of Financial Assistance for good cause.
Four more conditions shape the timeline and cost:
- If the old 504 loan was approved through another CDC, the new CDC must notify it in writing in advance.
- SBA charges a supplemental annual guarantee fee on a refinancing, in an amount it sets each fiscal year, on top of the regular annual fee.
- If the new bank or the CDC providing the refinancing, or an affiliate of either, already holds the debt being refinanced, SBA itself must approve the refinancing; a PCLP CDC cannot approve it under delegated authority.
- The new 504 loan must be disbursed within 9 months of approval, with up to 6 more months for good cause.
Paying off the old 504 loan follows 13 CFR 120.940: the entire principal balance, unpaid interest, any unpaid fees and any prepayment premium established in the note. Get a payoff figure from the CDC before you run the installment test. For how the 504 refinance program treats conventional debt, see refinancing a commercial mortgage with an SBA 504 loan.
Which path keeps which lien, and who has to approve it?
Each path keeps a different lien and turns on a different approval: a renewal on the bank's credit decision, a first-lien refinance on the new lender plus a CDC-executed subordination that SBA may also need to approve, and a full 504 replacement on the CDC, SBA and a new Third Party Lender, with the old 504 loan prepaid.
| Item | Renew with the current bank | New lender refinances the bank loan | New 504 replaces both loans |
|---|---|---|---|
| Item Bank first lien | Renew with the current bank Same lender, new maturity and rate | New lender refinances the bank loan Paid off; new lender takes first position | New 504 replaces both loans Paid off; new Third Party Lender takes first position |
| Item Existing 504 loan | Renew with the current bank Keeps running in second position | New lender refinances the bank loan Keeps running, subordinated behind the new loan | New 504 replaces both loans Prepaid in full under 13 CFR 120.940 |
| Item Approvals | Renew with the current bank The bank's credit decision | New lender refinances the bank loan New lender, plus a CDC-executed subordination (ask whether SBA must also approve) | New 504 replaces both loans CDC and SBA, plus the new Third Party Lender |
| Item Prepayment exposure | Renew with the current bank Bank note terms, if renewed before maturity | New lender refinances the bank loan Bank note terms, if refinanced before maturity | New 504 replaces both loans The 504 note's premium, plus bank note terms if refinanced before maturity |
| Item New cash | Renew with the current bank No future advances under the old note | New lender refinances the bank loan New lender's decision, ahead of the 504 lien | New 504 replaces both loans Eligible Business Expenses only if funds exceed the payoff |
| Item Rule to read | Renew with the current bank 13 CFR 120.921 | New lender refinances the bank loan 13 CFR 120.921 and the CDC's subordination review | New 504 replaces both loans 13 CFR 120.882(g) |
The renewal is fastest when the bank wants to keep the loan. The first-lien refinance fits when another lender beats the renewal terms. The full replacement is the heaviest lift and fits when the new installments pass the test and the old 504 note's premium is small enough to absorb.
What does refinancing a 2017 bank loan cost at today's rates?
Refinancing a 2017 bank loan costs more at today's index levels, because Treasury's 10-year par yield was 4.98% on October 29, 2026, against a 2.05% to 2.62% range during 2017, so a lender holding the same spread over that index lifts the note rate by 2.36 to 2.93 percentage points.
Illustrative example (our arithmetic, not a lender quote and not a YieldStack transaction): a business bought its building in June 2017 for $2,000,000 with a $1,000,000 bank first lien, an $800,000 504 loan and $200,000 down. The bank note ran 10 years on a 25-year amortization, priced at an assumed 2.50 points over the 10-year Treasury, which Treasury's 2017 table shows at 2.31% on June 30, 2017, for a 4.81% rate. The note balloons in June 2027. The same assumed spread over the October 29, 2026 reading of 4.98% gives 7.48%.
| Line | 2017 bank note | Refinance, 15-year amortization | Refinance, 25-year amortization |
|---|---|---|---|
| Line Rate | 2017 bank note 4.81% | Refinance, 15-year amortization 7.48% | Refinance, 25-year amortization 7.48% |
| Line Balance | 2017 bank note $1,000,000 | Refinance, 15-year amortization About $734,500 | Refinance, 25-year amortization About $734,500 |
| Line Monthly principal and interest | 2017 bank note About $5,736 | Refinance, 15-year amortization About $6,800 | Refinance, 25-year amortization About $5,418 |
| Line Change from the 2017 payment | 2017 bank note None | Refinance, 15-year amortization Up about $1,065 a month | Refinance, 25-year amortization Down about $318 a month |
The rate moved the payment up; the amortization decides whether it stays up. Keeping the original schedule adds about $12,775 a year in this example, while a fresh 25-year amortization brings the payment below the 2017 level. Run your own figures in the amortization schedule tool. The 504 loan's payment is unchanged in the first two paths.
The Federal Reserve held the federal funds target range at 3-3/4 to 4 percent on October 28, 2026, and the 10-year par yield printed 4.98% the next day. For a first lien quoted over a Treasury index, the index on the day you lock is the figure that counts.
How do you get a maturing SBA 504 bank loan placed before the balloon date?
You get a maturing 504 bank loan placed by pricing the renewal, a first-lien-only refinance and a full 504 replacement side by side, early enough that the CDC's subordination review or a new SBA approval fits inside the months left before the balloon date, and with every lender seeing the same package.
The brokerage route comes first here, for three reasons. YieldStack is an AI-native commercial mortgage brokerage that arranges financing for commercial real estate investors.
- Breadth: software matches the deal against 20,000+ loan programs and compares the options, so the bank's renewal offer is measured against first-lien refinance programs and SBA 504 options in the same pass.
- Speed: median first offer in under an hour, from an institutional lender, which leaves more of a 6-to-12-month runway for the CDC's review or SBA's approval.
- Cost: It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing.
Human brokers structure the deal, negotiate on the borrower's side and carry it toward closing. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
The package that gets clean quotes on a 504 first-lien maturity carries:
- The bank note, with its maturity date, rate, amortization and prepayment terms
- The 504 note and a current payoff figure from the CDC, including any prepayment premium
- Two years of business tax returns and year-to-date financials
- A current appraisal, since the 90% cap is measured against today's value
- The current installments on both loans, for the substantial-benefit test
- Whether the business wants new cash, and for which expenses
When it is ready, send the 504 maturity for review. Program basics are on the SBA loan page.
The bottom line
The bank loan in an SBA 504 matures on its own schedule, up to a decade before a 20-year 504 loan when the bank took the minimum term, and it cannot be called early unless it is in default. At the balloon, renew it, refinance it behind a subordinated 504 lien, or replace both loans with a new 504 refinancing that passes the installment test. Price all three paths six to twelve months before the maturity date.