3-5 year post-close refinance?

February 24, 2026

by a searcher from University of Pennsylvania - The Wharton School in Danville, CA, USA

Hi Folks, I'm under LOI on a landscaping company. This is a self-funded deal and my plan is long-term hold. I was recently told that searchers often refinance their SBA debt after 3-5 years to shed the PG. Can you help me understand how they do that? What are typical terms? Not looking for a specific quote, but just rough idea. For the sake of arguments, let's say my initial SBA loan is prime plus 2.5%. And in 5 years I have $1m in EBITDA and $2.3m in loan outstanding. What would you expect terms to look like then (using today's interest rates)? So what interest rate roughly, what term length, fixed or variable rate, could I shed the PG, any additional wonky terms? Thanks! Cory

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Great question. I actually posted something similar on this topic earlier today, but happy to share some thoughts here as well. We have done many refinances of SBA loans to conventional debt and sometimes hae refinanced that debt into new SBA loans with better terms over the years, so we definitely know how this works. There are a few things you need to keep in mind related to this, which are as follows: 1. Conventional banks typically do not offer loan terms as long as the SBA offers. Generally speaking, most conventional bank business loans are 5 to 7 years in length and if there is less collateral, they tend to shorten the loan term closer to 4 or 5 years. So if your loan is under-collateralized you would need the refinance to work on a shorter loan term, so you might need to get several years into your loan before you can refinance with conventional debt. 2. Conventional banks tend to want the loan mostly if not fully secured by collateral. They are much less likely to make loans largely backed by the goodwill value of the business. This is not always the case, but it is harder to get loans done that are not fully secured. However, unlike the SBA that focuses really only on fixed assets like machinery and equipment for the collateral value, conventional banks will look at A/R and inventory for collateral purposes as well. So using those assets might provide more collateral on a conventional loan then you would have from an SBA perspective. 3. I hear often that individuals look to shed the personal guarantee with conventional financing. Unfortunately, that can be very hard to do with most conventional banks and credit unions. Bank and credit union loan policies typically require full personal guarantees on small to mid-sized business loans, which is the size of businesses most SBA loans are made to. Because of that a personal guarantee is going to be likely. If the business is not fully secured by business assets, it will just about 100% be required. However, the personal guarantee from conventional banks does not require the pledge of personal assets like a residence that the SBA requires. So if your home is pledged on an SBA 7A loan, you can get it released with a refinance into a conventional loan and the conventional bank is unlikely to take it as direct collateral. However, your home is still indirectly at risk through your personal guarantee. If you are fully secured and have a very strong debt service coverage ratio ("DSCR"), usually well over 1.50x and maybe even over 2.00x, then it might be possible to get a conventional loan with a limited personal guarantee or no personal guarantee, but that is rare. 4. Conventional banks do not offer the blended or longer amortization that SBA 7A lenders offer when real estate and business assets are combined into one loan. If you have an SBA 7A loan with a longer amortization that you are looking to refinance into a conventional bank loan, then the assets are going to need to be split into two loans. Typically the Bank will fund 75% to 85% of the real estate value into one loan, which will typically have a 25-year amortization. The business related debt will get financed into a shorter business term loan of 5 to 7 years. Splitting these loans up like this can increase your required monthly payments as you lose the benefit of the blended or combined longer amortization. However, you will be paying principal down much faster on the business related debt. If the real estate value has gone up, you might be able to push more of the acquisition debt to the real estate over 25-years and have a lower business loan going forward. 5. Terms for conventional loans can vary depending on the lender, the strength of the business, the strength of the guarantor, historical financial performance, etc. However, most conventional lenders right now are offering fixed rates for business loans in the 6% to low 7% range and if a variable rate are typically pricing the loan at Prime to Prime plus 1.00% (with Prime at 6.75% that would be a range of 6.75% to 7.75%). Usually the loan term is going to be 5 to a maximum of 7 years. Of course real estate will qualify for a longer amortization. Conventional banks typically only offer 5, 7 or 10-year fixed rate loan terms for real estate but the payments are based on a 25-year amortization. So you do not get the 25-year loan term you get with the SBA 7A loan product. For the real estate you can have a balloon mortgage where at the end of the initial term the remaining principal comes due and you have to renew the loan with the current bank or refinance your loan elsewhere at that time. You can also have an ARM mortgage where the rate is fixed for the first 5, 7 or 10 years and then adjusts every year, three-years or five-years after the intial term. In this case you have a longer loan term, usually up to 25-years, but the rate adjusts over time. 80% of the banking market uses balloon mortgages versus ARM loans. I hope this information is of help. If you ever want to look at options to refinance out of an SBA 7A loan and see what you might qualify for, we can assist you in doing so. You can also look to refinance into an SBA 7A loan that might offer a fixed rate, or if you have real estate, use an SBA 504 loan for refinancing the real estate and then use a conventional loan for the business refinance. The SBA 504 loan will give you the benefit of a long-term fixed rate on a good portion of the debt. If you have questions you can reach me here or directly at redacted

Reply by a lender
from University of Colorado at Boulder in Denver, CO, USA

A lot of searchers refinance around years 3–5 once the business has de-risked and leverage has come down. At $1M EBITDA and $2.3M outstanding, you’re sitting at ~2.3x leverage, which is a very bankable profile. At that point, most refinances I see move into conventional bank debt rather than another SBA. Typical structure today would likely be: * 5–10 year term (often 5-year reset with 20–25 year amort if real estate is involved, 5–10 year fully amortizing if not) * Floating over SOFR or Prime, or fixed for 3–5 years  * Pricing generally inside SBA — depending on credit quality and banking relationship  * Covenant package tied to DSCR and leverage  * PG sometimes reduced or removed if leverage is low and there’s a meaningful equity cushion, but many banks still require at least limited recourse The key variable is how relationship-driven the lender is.

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