Refinancing exceptions for 7a

April 04, 2023

by a searcher from University of Colorado at Boulder in Los Angeles, CA, USA

Hello SF community - have read that 7a to 7a is tough but “If a borrower requests a loan modification but the lender cannot modify the terms, the SBA may also permit a refinance.” We are 18 months into a floating rate 10yr 7a @ P+2% and starting to sting, Fixed wasn’t an option by our lender at the time unfortunately. Anyone have experience w/ this? Hoping we can roll into P+0% new 10yr. Also consolidated biz has grown to $15mm revs - what size do you need to be to get SOFR based pricing… maybe non-recourse? Thanks in advance as always!

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

As a general rule you cannot refinance from one SBA 7A loan to another SBA 7A loan. Really the only exception to this rule is if the refinance will provide you a substantial savings on what you are currently paying. However, even that does not guarantee you will be able to move the loan. The problem is that the SBA needs to directly approve any loan being refinanced from one lender to another. As a general rule, the SBA rarely approves these refinances. A lot of it has to do with the fact that there is a huge secondary market for SBA loans and if SBA loans start getting refinanced all of the time, it could impact the market. Secondly, if you are looking for Prime + 0%, I rarely if ever see that pricing, especially if there is a lot of goodwill exposure as there often is with business acquisition loans.

My recommendation would be to try and get to a point where you can refinance into conventional financing. I think finding an SBA 7A replacement loan is going to be a challenge. Unless you find a large Bank willing to provide you with a fixed rate and go through the SBA directly to do it, I don't think you are going to get approved going from one variable rate loan to another. Fixed rate lenders are rare in the SBA world. The numbers have to make a lot of sense, and again you often cannot have too much goodwill exposure. I am more than happy to discuss this at any time if you need assistance and go through your specific options. You can ping me here or directly at redacted Good luck.

Reply by a lender
from University of Missouri in St. Louis, MO, USA

Thanks Karen. Hi Peter, common rule is that you have to provide material savings, and the current SBA lender has to send a letter stating they will not do the proposed loan. If you can do that, you would have two material issues with refinancing (at least in my opinion with some limited information) 1. you would have to pay the SBA fee again. This would seem cost prohibitive even if monthly payments are lower 2. The bulk of SBA lenders are floating rate. There are exceptions of course but most of us float the rate. Getting to P+0% would mean there is minimal secondary market to sell the loan so getting that rate would likely be tough. Your best bet is to see if your current lender would consider an express loan for you. This won't make the payments on your loan any cheaper, but would provide you capital as a bridge and hope the rates start to come down. The only reason a lender would accommodate a loan modification is if they feel you are going to start missing payments.

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