Who Can Refinance Debt With an SBA 7(a) Loan?

SBA 7(a) loans have attractive interest rates, repayment terms, and closing costs, but they do have stricter qualification requirements than some other business loans. 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 Type of Debt is Eligible for Refinancing With the SBA 7(a)?



SBA 7(a) loans are different from typical small business loans, and there are restrictions on what kind of debt you can refinance with these loans. In order for debt to be considered eligible for refinancing, lenders require documentation to prove that:

1. The debt is currently on unreasonable terms, such as a maturity that has ballooned, or a maturity that’s inappropriate for the loan’s original purpose. This also may include debt with interest rates exceeding the maximum allowable by the SBA or on a revolving line or credit card.

2. The original debt’s purpose would have been eligible for SBA financing. These purposes include land acquisition, new construction, property improvement, renovations, equipment, furniture, inventory purchase, working capital, and business acquisition.

3. Refinancing the debt will significantly benefit the small business. The SBA requires that refinancing is not done frivolously, and will determine the benefit of refinancing to your business.

What About Credit Card Debt?

Refinancing credit card debt is a bit different than refinancing other types of business debt. In order to qualify for an SBA loan, any credit card debt that’s to be refinanced must have been used exclusively for business purposes. If there are personal charges on the credit card, it will not qualify. Also, the the credit card debt must likely be sustainable by the SBA loan in part or in full, or otherwise be covered by additional collateral or altered items.

 Who Guarantees the Loan?

All owners of your business who have at least 20% equity in the company will be required to guarantee the loan, and you’ll need to include the names and information for each of these owners in your application paperwork. In addition, if your spouse has at least 5% equity in the company, and you and your spouse’s equity totals at least 20% — for example, if you have 15% equity and your spouse has 5% equity — your spouse will have to guarantee the loan, too.

One distinction: If you are a sole proprietor, you will not need to provide a separate personal guarantee for your SBA loan because you execute the note yourself as a borrower, instead of as a business.

What Documentation Will I Need to Provide?

Your lender will need specific information about your business, including the business type, size, age, location, and industry. You’ll also fill out forms providing your lender with your personal information, like your legal name, address, and immigration status.

The forms and documents commonly required in the application package include:

• SBA Form 1919 (borrower information form)

• SBA Form 912 (statement of personal history)

• SBA Form 413 (personal financial statement)

• Financial statements, including a balance sheet, profit and loss, and income projection

In order to refinance debt with an SBA loan, you’ll also need to provide proof that your debt qualifies. This means you’ll likely need:

• Documents showing your loan’s terms, balance, and lender

• Documentation of the purpose of the original loan you wish to refinance

• Financial statements and projections showing the benefit of refinancing to your business

The SBA allows applicants to get help filling out the application paperwork — for example, from a lawyer or a translator — but your lender will be required to submit information about who provided this assistance to the SBA, so you’ll need to document this as well.

Case Study: Refinancing a Café

⁠Sarah, a dedicated entrepreneur, opened a charming café in the heart of Bethesda, Maryland. Her café quickly became a local favorite, attracting residents and tourists alike with its cozy atmosphere, delicious coffee, and freshly baked pastries. As business grew, Sarah made several improvements to the café, including expanding the seating area and upgrading the kitchen equipment.

To finance these improvements, Sarah took out several high-interest, short-term loans from various lenders. Although the café was thriving, the high monthly loan payments began to strain her cash flows, making it difficult for her to invest in further growth.

After conducting some research, Sarah discovered that she could use an SBA 7(a) loan to refinance her existing business debt. Intrigued by the possibility of lower monthly payments and a more manageable debt structure, she approached a local bank to discuss her options.

After a thorough evaluation of her financial situation and the café's performance, Sarah was approved for a 10-year, $150,000 SBA 7(a) loan at a low, fixed interest rate. With this loan, she was able to consolidate her high-interest debt into one manageable loan with a longer repayment term. The lower monthly payments provided immediate relief to her cash flow, allowing her to focus on growing her café.

With the SBA 7(a) loan, Sarah was able to successfully refinance her existing business debt, easing the financial burden on her thriving café. The refinancing gave her the flexibility and breathing room she needed to invest in additional marketing efforts and menu development, ultimately driving even more business to her beloved café.

This is a fictional case study provided for illustrative purposes.

I'm Ready to Refinance With the SBA 7(a): What's Next?

Once you’ve decided that an SBA 7(a) loan is for you, you’ll need to contact a lender to help you get started. There are a whole array of SBA loan products — from the Standard 7(a) to the Express loan — so it can be overwhelming to sort through the paperwork, terms, and jargon.

Complete the form below and we'll round up the best lenders and walk you through the best loans for your unique situation.

In this article:

1. Using the SBA 7(a) Loan to Refinance Debt
2. But First: What Is the SBA 7(a) Loan?
3. Who Can Refinance Debt With an SBA 7(a) Loan?
4. What Type of Debt is Eligible for Refinancing With the SBA 7(a)?
5. What About Credit Card Debt?
6.  Who Guarantees the Loan?
7. What Documentation Will I Need to Provide?
8. Case Study: Refinancing a Café
9. I'm Ready to Refinance With the SBA 7(a): What's Next?
10. Get Financing