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Refinancing debt with an SBA loan is a smart move for many business owners. Doing this can increase cash flow and swap poor loan terms for favorable ones. Not all debt is eligible, and a business must meet specific requirements to secure refinancing through the SBA.
At Business Funding Group (BFG), we have decades of experience helping business owners secure SBA loans and refinancing. We can determine your eligibility during a complimentary, 10–to 15-minute, no-obligation phone call. Contact us today to discuss your SBA loan refinance options.
The main goal of debt refinancing is to put the borrower in a better financial position than before the new loan, and a calculation can determine this. SBA loan refinancing must reduce the borrower’s monthly installment payments by at least 10%.
For example, if a business owner currently pays $10,000 per month on an existing loan, the new SBA loan must lower that amount to $9,000 or less per month to qualify. This is to ensure business owners receive actual benefits from refinancing rather than simply moving debt from one place to another.
To qualify for refinancing, the original debt must have been used for a purpose that would have been eligible for an SBA loan. Examples of eligible debt include:
Certain types of debt are ineligible for SBA refinancing. Examples of ineligible debt include:
Refinancing credit card debt is especially complicated because all charges must have been made for business purposes only. The debt would be ineligible for refinancing if the business owner made any personal charges on the card. Each line item would require review to determine eligibility, which makes this a less-than-ideal choice.
Refinancing an existing SBA loan with another SBA loan is not necessarily prohibited, but it certainly is not the norm.
When refinancing a loan, the new SBA lender must take the same Uniform Commercial Code (UCC) lien position as the original lender. This means that if the original loan was secured with specific business assets, the lender must secure the new loan with those same assets.
This requirement ensures that the loan maintains the same security interest in the business’s assets as the original loan. Before refinancing, lenders will conduct a UCC lien search to verify existing claims on assets and ensure proper collateral placement.
Refinancing business debt can help your business in many ways. SBA loan refinancing can lower monthly payments, secure better loan terms, and offer more financial stability. To take advantage of this option, the debt you want to refinance must be current (and must have been so for the last 12 months or the life of the loan—whichever is less).
It is important to understand that SBA eligibility rules are strict and ensure the debt qualifies for refinancing with a clear financial benefit. If you’re a business owner considering SBA loan refinancing, it’s helpful to work with experienced professionals when navigating these requirements.
At BFG, we can help you assess your current debt schedule, determine your eligibility for refinancing, and assist with the refinancing process. Contact us today to learn more about your SBA loan refinance options.
(917) 593-5013