Can You Use SBA Express Loans to Refinance Business Debt?
If you currently have small business debt, an SBA Express loan can be a great way to refinance it. While it’s common for businesses to take on debt to expand their operations, if your debt is on unreasonable terms, and you have trouble affording your monthly payments, the debt could be significant
Better Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get QuotesIf you currently have small business debt, an SBA Express loan can be a great way to refinance it. While it’s common for businesses to take on debt to expand their operations, if your debt is on unreasonable terms, and you have trouble affording your monthly payments, the debt could be significantly affecting your ability to run your business successfully.
When Can Businesses Refinance Debt With An SBA Express Loan?
The debt must have been used for an SBA-eligible purpose: This means that your business must have made purchases with the debt that they would have been able to make with an SBA loan. These include buying real estate, purchasing an existing business, funding working capital, and buying equipment.
The debt must be on unreasonable terms: Certain balloon loans, loans with interest rates much higher than SBA maximums, and high-interest rate credit cards may all be classified as unreasonable by the SBA.
The business will benefit from the refinancing: Since refinancing debt is not the main or stated purpose of the SBA Express loan program, a business will have to demonstrate that the refinance will put the business in a better financial position, perhaps helping it free up the cash to expand or hire new employees.
How to Refinance Debt With an SBA Express Loan
If you want to refinance debt with an SBA Express loan, you’ll need some documentation, which usually includes:
Any relevant documents involving the debt you want to refinance (including the loan’s terms, balance, and lender)
Statements/projections that can demonstrate your business will benefit from the refinance
Documents showing the initial purpose of the debt you want to refinance
Refinancing Credit Card Debt With an SBA Express Loan
If you have business credit card debt, you may also be able to refinance this with an SBA Express loan. However, you’ll need to make sure that all the charges on the credit card were for business, not personal uses, and you may need to provide additional collateral to compensate for the additional risk that refinancing credit card debt may entail.
Related Questions
What are the requirements for an SBA Express loan?
To qualify for an SBA Express loan, businesses must meet the eligibility requirements determined by the SBA 7(a) program. These requirements include:
- Operating for profit in the USA
- Having been in operation for at least two years
- Meeting SBA size standards
- Having already looked for alternative funding
- No delinquencies or debt obligations to the US government
- Good character and a credit score of 600-650
Certain businesses may be ineligible, and additional documents such as a personal history statement and financial projections may be required. If approved, the funds will be disbursed within 90 days and a guaranty fee will be required.
For more information, please refer to the SBA Express Loan Requirements page.
What types of debt can be refinanced with an SBA Express loan?
The debt must have been used for an SBA-eligible purpose and must be on unreasonable terms. Eligible purposes include buying real estate, purchasing an existing business, funding working capital, and buying equipment. Certain balloon loans, loans with interest rates much higher than SBA maximums, and high-interest rate credit cards may all be classified as unreasonable by the SBA. The business must also demonstrate that the refinance will put the business in a better financial position.
How long does it take to get approved for an SBA Express loan?
SBA Express loans are very fast. Expect a determination on your application within three days, maximum. And after that, funds will typically be dispersed in as few as 20 days.
According to this source, it takes an average of 28-30 days to close an SBA microloan, which is the fastest form of SBA funding.
What are the benefits of refinancing business debt with an SBA Express loan?
Refinancing business debt with an SBA Express loan can provide a number of benefits to businesses. These include:
- Lower interest rates: SBA Express loans have maximum interest rates of 6.5%, which is much lower than many other loan products.
- Longer repayment terms: SBA Express loans can have repayment terms of up to 7 years, which can help businesses manage their cash flow.
- Flexible collateral requirements: SBA Express loans may require less collateral than other loan products.
- Potential for additional funding: Refinancing debt with an SBA Express loan may free up cash for businesses to use for other purposes, such as expanding or hiring new employees.
For more information, please visit www.sbaexpress.loans/blog/refinancing-debt-with-sba-express-loans.
What are the risks of refinancing business debt with an SBA Express loan?
The risks of refinancing business debt with an SBA Express loan include the need to provide additional collateral to compensate for the additional risk that refinancing credit card debt may entail. Additionally, you may need to provide documentation such as any relevant documents involving the debt you want to refinance (including the loan’s terms, balance, and lender), statements/projections that can demonstrate your business will benefit from the refinance, and documents showing the initial purpose of the debt you want to refinance.