Is It Time to Refinance Your SBA 7a Loan?

February 22, 2023

Do you have a Small Business Administration SBA 7a loan that is at least three years old?

Have you been meeting your business plan goals and objectives?

Now is a good time to examine what the options are for refinancing your SBA 7a loan.

Timing an SBA 7a Refinance

• Three years: SBA 7a loans have prepayment penalties for the first three years. Therefore, we advise most borrowers to wait until the three years have elapsed before seeking refinances. There are a few select cases, however, where the prepayment penalties are worth it.

Do you have evidence of meeting profit targets? If you are looking to refinance a loan, lenders need evidence that your business is largely on target. We find that lenders are willing to overlook the market disruptions of COVID, especially during mandatory lockdowns. Other than that, your financial statements should demonstrate sustained profitability. In addition to financial statements, lenders and appraisers typically require evidence from third parties. These can include STR reports or sales tax bills based upon revenue receipts.

• Debt Coverage:  The most important factor in finding affordable, reasonable loans is your current debt coverage. Lenders are not impressed just with the value of your property. In this somewhat volatile economic milieu, demonstrating the ability to pay back loans and having capital reserves is key.

Debt Refinance Possibilities and Other Structures:  We can help you determine the best next steps. It might be to refinance existing debt, retire part of it or even restructure it. We can help evaluate your financing and cash flow needs. You will have a better sense of what type of financing options exist and choose the best one for your business.

If you would like to discuss your SBA 7a loan or any other business plans, feel free to contact our team.  We can conduct a business evaluation, reach out to our lenders, offer advice on bidding and secure financing for you. An initial business evaluation is complimentary.

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