# What collateral and term apply to an SBA refinance?

**Short answer:** The new loan must carry at least the same collateral and lien priority as the old debt (SOP 50 10 8.1, App. 19, Para. A). Trading assets are excepted. The term follows what the debt paid for, with a blended maturity on mixed uses (App. 17, Para. A.5).

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Last checked: 2026-11-08

The new loan must generally keep at least the same collateral and lien priority as the debt it replaces. Appendix 19, Paragraph A of SOP 50 10 8.1 excepts trading assets, and a program-specific rule can say otherwise.

## Collateral

- If the old debt is over-collateralized under SBA's rules and the SBA loan stays fully secured, the lender may release the excess.
- Substitute collateral may be accepted if it has comparable value and useful life and is acceptable to SBA or a Preferred Lender Program (PLP) lender.
- On a Standard 7(a), when proceeds refinance assets, the lender must take a first lien on them (App. 19, Para. B.1).

Over-collateralized debt is itself an eligible type to refinance (App. 14, Para. A.1.d).

## Term

Appendix 17 caps the term by what the debt paid for. Working capital and inventory can run 10 years. Equipment can run 10 years, or up to 15 years if the IRS asset class useful life supports it. Real estate can run 25 years, plus any reasonable construction or renovation period. The general rule is the shortest appropriate term based on the use of proceeds and the borrower's ability to repay.

Mixed-purpose loans, and refinancing of those purposes, follow Appendix 17, Paragraph A.5. Such a loan can have a blended maturity, or up to 25 years if 51% or more of the proceeds are for real estate. Change of ownership loans follow Appendix 15.

A maturity that did not fit the purpose is also an eligible reason to refinance. SBA's example is a 3-year loan on equipment with a 15-year useful life (App. 14, Para. A.1.f).

## Real estate occupancy

Refinancing debt secured by real estate carries the occupancy rules: 51% of an existing building, 60% of new construction (Sec. A, Ch. 3, Para. C.1).

## Sources

- [SOP 50 10 8.1, App. 19, Para. A, General Requirements, Refinance transactions (p. 404)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 19, Para. B.1, Standard 7(a) Loans (Para. B begins p. 408)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 17, Para. A, Loan Maturity Requirements (p. 390)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 15, 7(a) Changes of Ownership (p. 362)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 14, Para. A, General Requirements, Paras. A.1.d and A.1.f (p. 355)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. A, Ch. 3, Para. C, Occupancy and Leasing Requirements, Para. C.1 (p. 54)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)