Can another lender refinance my SBA 7(a) loan?
Short answer
Yes. SOP 50 10 8.1, App. 14 lets a lender refinance another lender's 7(a) loan if every Appendix 14 condition is met, including the payment test. Any subsidy recoupment fee on the old loan still applies.
Yes. Proceeds may refinance existing 7(a) loans from other lenders if Appendix 14's conditions are met (SOP 50 10 8.1, App. 14, Para. A). Any applicable subsidy recoupment fees apply.
What has to be true
- The existing loan must be current for at least the last 12 months or the life of the loan, whichever is less.
- The new payment must be at least 10% less than the existing installment amounts in aggregate, unless the debt is an excepted type.
- The refinance may not pay a creditor in a position to sustain a loss.
- The SBA Terms and Conditions must identify the refinancing and state the loan number and dollar amount of the SBA debt.
- A written analysis must explain why the debt no longer meets your needs and how the new loan improves your financial condition.
A past-due SBA loan is a separate problem. If an existing 7(a) or 504 loan is not current when the new loan number issues, the business is ineligible (Sec. A, Ch. 1, Para. E).
A 504 path
A 504 project can also refinance an existing 7(a) loan. With expansion, it can do so in whole or in part. The Certified Development Company (CDC) must notify the existing lender in writing at least 10 business days ahead (Sec. C, Ch. 1, Para. C.11.b).
Lenders set their own appetite for these deals. A new lender still has to show credit is not available elsewhere on reasonable terms (Sec. A, Ch. 1, Para. H).
Sources
- SOP 50 10 8.1, App. 14, Para. A, General Requirements, Refinancing a 7(a) loan of another Lender (p. 355)
- SOP 50 10 8.1, Sec. A, Ch. 1, Para. E, existing 7(a) or 504 loan not current (Para. E begins p. 18)
- SOP 50 10 8.1, Sec. C, Ch. 1, Para. C.11.b (Para. C begins p. 226)
- SOP 50 10 8.1, Sec. A, Ch. 1, Para. H, Credit Not Available Elsewhere (p. 37)
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