Can You Refinance a SBA Loan?

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The Small Business Administration (SBA) provides resources to assist entrepreneurs in gaining funding to both start and expand their operations. The SBA helps business owners refinance private debts into low-cost SBA guaranteed loans. However, once a borrower has an SBA loan, it is challenging to refinance this debt to a new payment schedule.


The SBA does not refinance a loan that already has an SBA guarantee in most circumstances, according to the SBA website. The SBA generally believes the borrower is already benefiting from the organization's programs, and it would rather appropriate funds to a new borrower. It is important to consider the fact SBA loan refinances of existing SBA loans are rare before applying.


There are two situations in which the SBA will approve a refinance application on an existing SBA loan. In the first scenario, the borrower has approached a new lender for another business loan. This lender has refused the loan without an SBA guarantee. If the new lender can document this requirement and has contacted the previous lender to inform it of this requirement, the SBA may be willing to refinance the existing loan, so it may extend a guaranty on the new loan as well. In a second scenario, the SBA may approve a refinance if the existing lender cannot modify the loan terms because the loan has been sold on the secondary market.


If you would like to refinance because your lender refuses to modify the terms on your loan, you can apply with the SBA to do so. You will need a statement from your existing private lender to verify the lender is refusing to modify terms. Then, you will need to go through the process of applying for a completely new loan according to the terms you would prefer. The SBA will have to approve the guaranty for a second time; you cannot simply resubmit your initial loan application.


Just because the SBA does not often refinance its own loans does not mean you cannot work with a lender to change your loan terms. The SBA expects lenders to be willing to modify loan terms and payments to accommodate a borrower.


The SBA will not approve refinancing on a delinquent loan. Before applying, make sure you have make payments consistently on time for 36 months, according to the SBA website.