7a Refi

December 16, 2017

by a searcher from Babson College - F.W. Olin Graduate School in Boston, MA, USA

Does anyone have any data or info on refinancing out of 7a loans? Pre-payment penalty aside, I'm trying to research what other restrictions/covenants/roadblocks typically exist if we try to refi out of a 7a, 12-36 months into a loan. Any feedback would be helpful, thank you!

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Reply by a lender
in Yorba Linda, CA, USA

From the SBA/lender side, the only restriction is that you generally (there are a few rare exceptions) cannot refinance an SBA 7(a) loan with another SBA 7(a) loan. Since you are confined to a conventional loan, it's best to compare the terms. In most cases, you will be better off keeping the SBA loan since it gives you a 10 year amortization and term and your interest rate is 7% or lower. Also, don't forget to factor in the SBA guaranty fee you paid at closing as an additional "lost" cost of refinancing. Many conventional loans will only offer a 5 year amortization. If you can find better terms (or the cash flow of the business can easily support a more aggressive amortization schedule) then the SBA lender can be paid off in full at any time without penalty. In my experience, the terms and cost of the SBA 7(a) loan are almost always better than the alternatives.

Reply by a searcher
from Harvard University in 1970 Walton Dr, Burlington, WA 98233, USA

I'm happy to send you my 7a loan agreements and you can parse through on your own, but my understanding is that my loan has no prepayment or restrictions on refinancing.

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