Can an SBA loan refinance a seller note?
Short answer
Yes, after it has been in place and current for 36 months. The note must not be on standby during that period (SOP 50 10 8.1, App. 15, Para. A.3.a). The refinance must meet the payment test and must not reduce the lender's exposure.
Yes, once the note has seasoned. Seller debt can be refinanced after it has been in place and current for 36 months (SOP 50 10 8.1, App. 14, Para. A.1.g).
The extra conditions in Appendix 15
The note must have been in place and current for that period after the change of ownership, and not on standby (App. 15, Para. A.3.a). The refinance must meet SBA's payment improvement test and must not reduce the lender's exposure.
A note on full standby may count as equity in the purchase (App. 15, Para. C.2.a). Full standby means no payments of principal or interest for the term of the 7(a) loan. Time on standby does not count toward the period above.
What changed
SOP 50 10 8 required 24 months. SOP 50 10 8.1 lengthened the period, effective October 1, 2026.
Collateral
When proceeds refinance change-of-ownership debt, the loan must be secured with at least the same collateralProperty a lender can take and sell if a loan is not repaid. and lien priority as that debt (App. 15, Para. C.3).
Debt tied to the sale itself
Debt used to buy a going concern is an eligible type (App. 14, Para. A.1.g). Paying off existing business debt as part of an Initial Acquisition is not refinancing under Appendix 14. It is part of the change of ownership and must meet Appendix 15 (Para. A.3.a).
Sources
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