Refinancing Loan

Refinance

Does your business have debt that you want to refinance and/or consolidate? The SBA program is a great resource to accomplish this for you! Refinancing through the SBA program can increase your cash flow allowing you to have more working capital for your business needs!

The main thing to know before reaching out to a lender to refinance your loans through the SBA program is to make sure that your debt that you are refinancing was used strictly for business purchases. The second is that you have to be current on the debt you are wanting to refinance. 

Be prepared to give the lender a copy of the Notes and or Leases that you want refinanced. If the note/loan you want to refi has a balloon payment the note is automatically eligible to be refinanced through the SBA program. If for example the note is a 5 year term and a lender could have given a 10 year term it is eligible note to refinance through the SBA program.

If you want to refinance a seller carry note that’s original purpose was to purchase a business then you will have to be able to show at least the most recent 24 months of timely payments on that seller carry note before the SBA considers it eligible to refinance.

Refinancing a note that was originally used to purchase commercial real estate will typically be allowed a 25 year term. Refinancing most everything else will typically allow a 10 year term.

Borrowers are not allowed to complete the common “cash out” refinances through the SBA program like you can on other conventional loans, meaning you cant cash out on the equity in a commercial building by refinancing and pulling out additional capital just because you can. However what most banks can do is add in additional working capital in a refinance loan if it is justified that the business needs additional working capital. Keyword Justified.

When refinancing loans through the SBA program the bank will need to take the same collateral and collateral position that the previous bank took on the note that is to be refinanced.

Documents that most lenders will ask for to assist in assessing a refinance are: Debt Schedule of the subject business which will break out the loan details on the notes that are being refinanced, Business Tax Returns from the subject business, most recent profit and loss and balance sheet.

Many banks do not like refinancing MCA loans (merchant cash advance loans) these are loans that are very easy to get and have interest rates as high as 60% or more!! Don’t get sucked into these predatory loans!!! These loans not only strip your business of working capital but in most cases hurt your ability to refinance them. Most lenders hesitate to refinance these loans because they don’t want to refinance you out of a bad situation and have you go out there and get right back into predatory loans possibly hurting your business again. Most banks will think you do not make the best decisions if you are going out there and obtaining these loans in the first place.

Rates are at historic lows and can possibly free up a lot of cash flow for your business during a time that may be uncertain. Talk to a Guru now to see what your options are!