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Small Business and SBA Lending Blog
Last updated on Mar 17, 2023
2 min read

Can You Refinance an SBA Loan?

In most cases, the SBA will not permit a borrower to refinance an SBA-guaranteed loan such as the SBA 7(a) or SBA 504 loan. However, this doesn’t mean that borrowers who have trouble paying back their loans or want to achieve better loan terms don’t have any options.

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In this article:
  1. The SBA Will Refinance Loans Under Certain Circumstances
  2. SBA Refinance Calculator
  3. Related Questions
  4. Get Financing

In most cases, the SBA will not permit a borrower to refinance an SBA-guaranteed loan such as the SBA 7(a) or SBA 504 loan. However, this doesn’t mean that borrowers who have trouble paying back their loans or want to achieve better loan terms don’t have any options.

The SBA Will Refinance Loans Under Certain Circumstances

While SBA loan refinances are rare, they are permitted in some situations. For example, if a borrower applies for a non-SBA loan, and the lender tells them that they cannot get approved for financing without an SBA guarantee, the SBA might decide to permit a refinance of the current loan in order to guarantee the borrower’s new source of financing. However, for this to occur, the borrower and both lenders will need to bring significant documentation to the SBA for approval.

In addition, if a borrower requests a loan modification, but the lender cannot modify the terms because the loan has already been sold on the secondary market, or ‘securitized,’ the SBA may also permit a refinance. In order to get refinancing in this situation, a borrower would need to contact the SBA directly with documentation from their lender, and would then have to apply for a completely new loan. In order to be eligible for any kind of SBA refinancing, a borrower must be in good standing and must have been current on all loan payments for the previous 36 months.

SBA Refinance Calculator

Related Questions

What are the benefits of refinancing an SBA loan?

The main benefit of refinancing an SBA loan is that it can provide a borrower with more favorable loan terms. This could include a lower interest rate, a longer repayment term, or a lower monthly payment. Additionally, refinancing can provide access to additional funds, which can be used for business expansion or other investments. According to the SBA, refinancing is only allowed in certain circumstances, such as when a borrower applies for a non-SBA loan and the lender tells them that they cannot get approved for financing without an SBA guarantee, or when a borrower requests a loan modification but the lender cannot modify the terms because the loan has already been sold on the secondary market. In order to be eligible for any kind of SBA refinancing, a borrower must be in good standing and must have been current on all loan payments for the previous 36 months.

In addition, refinancing can be used to generate down payment funds for an SBA loan. This could include refinancing a mortgage, car, or boat if the conditions are right.

What are the requirements for refinancing an SBA loan?

In order to refinance debt with an SBA loan, you’ll need to meet certain eligibility requirements. Generally, here are the eligibility requirements for refinancing with an SBA 7(a):

  • Credit score of at least 690
  • No bankruptcies in the past three years
  • A minimum down payment of 10%
  • For franchisees, a paid franchise fee prior to loan fund release
  • A clean criminal history, or the ability to explain any misdemeanors on your record
  • No current federal debt

In addition, the business that will benefit from the refinanced debt will generally need to be:

  • A for-profit entity
  • A small business by definition
  • Based in the United States
  • A business with invested equity
  • A business that has exhausted all other financing options

These requirements ensure that the loan is eligible for SBA backing. If the loan is ineligible, you’ll need to seek other forms of small business financing to restructure your debt.

What are the different types of SBA loan refinancing?

The Small Business Administration (SBA) offers two types of loan refinancing: the SBA 7(a) and the 504 loan. The SBA 7(a) loan typically caps at $5 million, while the 504 loan can go as high as $20 million. 7(a) financing is generally much faster to get, but interest rates are far more competitive with the 504 vehicle — at the cost of additional bureaucracy and a slower timeline. Both types of loans are generally full recourse, and all borrowers' businesses must meet the SBA's type and size requirements to qualify.

Compare current rates for SBA loans in the table below:

Loan Type Interest Rate Term Length
SBA 7(a) Variable, tied to WSJ Prime Rate Up to 25 years
SBA 504 Variable, tied to WSJ Prime Rate Up to 25 years

What are the risks associated with refinancing an SBA loan?

Refinancing an SBA loan can be a great way to get better terms and lower interest rates, but there are some risks associated with it. The most significant risk is that the SBA may not approve the refinance, which could leave the borrower in a worse financial position than before. Additionally, the borrower may have to pay additional fees and closing costs associated with the refinance, which could add to the overall cost of the loan. Finally, the borrower may have to provide additional documentation to the SBA in order to be approved for the refinance, which could be time-consuming and costly.

How long does it take to refinance an SBA loan?

The length of time required for an SBA loan to be refinanced can vary drastically, but averages between 60 and 90 days. With that being said, it may take up to six months in some situations. There is no hard and fast rule here, and each situation will be unique. Factors that go into determining the length of time to loan approval include:

  • Your ability to gather all required information
  • Your ability to satisfy all lender requirements for information and proof of income
  • SBA approval (up to 7 days)
  • Due diligence (2 to 3 weeks)
  • Closing (up to 14 days)

In addition, for a borrower to be eligible for any kind of SBA refinancing, they must be in good standing and must have been current on all loan payments for the previous 36 months.

For more information, please visit www.sba7a.loans/sba-7a-loans-small-business-blog/refinancing-an-sba-loan and sba504.loans/sba-504-blog/sba-504-approval-time.

In this article:
  1. The SBA Will Refinance Loans Under Certain Circumstances
  2. SBA Refinance Calculator
  3. Related questions
  4. Get Financing
Tags
  • SBA 7(a) Loans
  • SBA Loans
  • SBA 7(a)
  • SBA Business Loans
  • Small Business Administration
  • SBA Loan Refinancing
  • SBA Loan Modification

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