# Refinancing business debt: when it saves money **Short answer:** Refinance when the new loan costs less in total dollars or fixes a real problem. A lower payment alone can cost more overall. SBA requires the new payment to be at least 10% less than the existing installment amounts in aggregate. Source: SOP 50 10 8.1, Appendix 14. Canonical page: https://www.sbaexpress.loans/guides/refinancing-business-debt/ Last checked: 2026-11-09 ## On this page - [A lower payment is not a lower cost](#a-lower-payment-is-not-a-lower-cost) - [A refinance saves money when the rate falls and the term does not grow](#a-refinance-saves-money-when-the-rate-falls-and-the-term-does-not-grow) - [A five-step comparison keeps the math honest](#a-five-step-comparison-keeps-the-math-honest) - [Fees set the break-even point](#fees-set-the-break-even-point) - [SBA refinances some debts and refuses others](#sba-refinances-some-debts-and-refuses-others) - [A refinance can change what you pledge](#a-refinance-can-change-what-you-pledge) - [When refinancing is a bad idea](#when-refinancing-is-a-bad-idea) ## A lower payment is not a lower cost A lower payment can still cost you more. In the Federal Reserve's 2025 survey, 28% of applicants said they sought financing to refinance or pay down debt. The first question is whether a refinance lowers your cost or only your payment. Suppose you owe two loans. Loan A has a $90,000 balance and a $3,100 payment for 36 more months. Loan B has a $50,000 balance and a $2,600 payment for 24 more months. You will pay $174,000 on a $140,000 balance. About $34,000 of that is interest still to come. Now suppose one 10-year loan replaces both. It covers the $140,000 plus about $5,000 in fees, so $145,000. Use 10% interest for the arithmetic, not as a quote. The payment is about $1,916 a month, against $5,700 now. That is 66% lower. Over ten years you would pay about $229,900, which is $55,900 more than the old loans. If your problem is cash flow, a payment cut of up to $3,784 a month may be worth $55,900. The cut falls to $1,184 after month 24, when loan B ends. After month 36 you pay $1,916 a month that the old loans would not have charged. If your problem is cost, this refinance fails. Know which problem you are solving before you sign. ## A refinance saves money when the rate falls and the term does not grow A refinance that keeps the term and lowers the rate saves money. Suppose you owe $100,000 with 36 months left. The old loan costs 18% interest and the payment is about $3,615. You would pay $130,149 in total. A new loan covers the $100,000 plus $3,500 in fees, so $103,500. Assume 10% interest over the same 36 months. The payment is about $3,340 and the total is $120,228. You save about $276 a month and $9,921 overall, after fees. These rates are assumptions for the arithmetic, not quotes. Compare the two examples. The first cut the payment by stretching the term and cost more. This one cut the cost and kept the term. Look for the second kind. ## A five-step comparison keeps the math honest Use the same five steps on any refinance offer: 1. List every debt: balance, payment, payments left, rate and prepayment terms. 2. Add up the payments left on all of them. That is your old total. 3. Add up the new loan's payments and every fee. That is your new total. 4. Subtract the new total from the old total. A positive result is a saving. 5. If the result is negative, ask whether the lower payment is worth that price. Ask each current lender for a payoff letter that lists any fees. The payoff amount can differ from the balance on your statement. ## Fees set the break-even point Fees set the break-even point, so count every fee before you count savings. Take a $200,000 SBA loan. SBA guarantees up to 75% of it, so assume a $150,000 guaranteed portion. The FY2027 upfront fee is 3% of the guaranteed portion, which is $4,500. A lender may add up to $2,500 for packaging without documenting the service. Together that is $7,000, or 3.5% of the loan. The lender may pass the upfront fee to you (SOP 50 10 8.1, Sec. A, Ch. 4, Para. C). Those figures assume no waiver. Check whether you qualify for the FY2027 waiver. Eligible borrowers pay 0% for loans of $700,000 or less to manufacturers (NAICS 31-33), listed food supply chain businesses and businesses in rural areas. If the refinance saves you $400 a month, you break even after 17.5 months, because $7,000 divided by $400 is 17.5. If you may sell the business or refinance again sooner, the savings never arrive. Check the other side too. Your current loans may carry prepayment fees, so ask each lender. SBA bars a 7(a) lender from charging prepayment fees on the new loan. You can pay the new loan down early and save interest. For loans of 15 years or more, SBA's own recoupment fee can apply to large prepayments in the first three years (13 CFR § 120.223). ## SBA refinances some debts and refuses others SBA refinances some business debts and refuses others. The rules are in SOP 50 10 8.1, Appendix 14. - The debt must be current for at least the last 12 months or the life of the loan, whichever is less. Current means no required payment has gone unpaid for more than 29 days. - The new payment must be at least 10% less than the existing installment amounts in aggregate. - Business credit card debt is eligible if the applicant certifies the proceeds were used exclusively for the business. - A home equity line is eligible if the applicant certifies the amount was used exclusively for the business. - Factoring agreements are not eligible for refinancing. - A seller note from a business purchase can be refinanced after it has been in place and current for 36 months. Some debts skip the payment test. They are balloon and demand debt, business credit cards, home equity lines used for the business, and revolving lines the lender will not renew. A revolving line you restructure for a lower rate or longer term also skips it. The SOP also lists debt above SBA's maximum rate and debt with a maturity that does not fit its purpose. Those debts can be refinanced, but the SOP does not exempt them from the payment test. A three-year loan on equipment that lasts fifteen years is the SOP's own example of a poor fit. Merchant cash advances qualify only in a narrow case. See the [merchant cash advance guide](https://www.sbaexpress.loans/guides/getting-out-of-a-merchant-cash-advance/). ## A refinance can change what you pledge A refinance can change what you pledge. An SBA refinance loan must carry at least the same collateral and lien priority as the debt it replaces. Trading assets such as receivables and inventory are the exception. The lender may release collateral beyond what SBA requires or accept a comparable substitute. A Standard 7(a) loan must also be fully secured (SOP 50 10 8.1, Appendix 19, Paras. A.1.b and B.1). If your business's fixed assets leave a shortfall, the lender must take available equity in personal real estate. It does not have to when that equity is less than 25% of fair market value. The lien can be limited to the collateral shortfall or 150% of the equity in the property. A lender cannot decline a request solely because collateral is inadequate. So an unsecured line or a card balance can turn into debt that touches your home. Ask the lender, before you apply, which assets and which owners' property the new loan would pledge. Owners with 20% or more of the business generally must also guarantee it (13 CFR § 120.160). ## When refinancing is a bad idea - **The only gain is a longer term.** A longer term lowers the payment and raises total interest, as in the example above. - **Fees exceed the savings during the time you will hold the loan.** Run the break-even. - **The new loan pledges property the old debt did not.** Check the collateral before you sign. - **You are refinancing a merchant cash advance with another one.** The new advance can charge a fee on the balance you still owe. See the [merchant cash advance guide](https://www.sbaexpress.loans/guides/getting-out-of-a-merchant-cash-advance/). - **Your payments are late beyond the 29-day line.** SBA will not refinance debt that is not current. ## Sources - [SOP 50 10 8.1, Appendix 14: 7(a) Debt Refinancing Requirements, Para. A (pp. 355-357)](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, Appendix 19, Paras. A.1.b and B.1 (pp. 404-409); Sec. A, Ch. 4, Para. C (pp. 62-70)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx) - [SBA Information Notice 5000-881797, FY 2027 7(a) program fees (effective October 1, 2026)](https://legacy.sba.gov/document/information-notice-5000-881797-fy-2027-7a-program-fees) - [13 CFR § 120.223, Subsidy recoupment fee payable to SBA by Borrower](https://www.ecfr.gov/current/title-13/section-120.223) - [13 CFR § 120.160, Loan conditions, personal guarantees](https://www.ecfr.gov/current/title-13/section-120.160) - [Federal Reserve Banks, 2026 Report on Employer Firms (Small Business Credit Survey, 2025 survey), p. 10](https://www.fedsmallbusiness.org/-/media/project/clevelandfedtenant/fsbsite/reports/2026/2026-report-on-employer-firms/2026-report-on-employer-firms.pdf)