7a Refi

by a searcher from Babson College - F.W. Olin Graduate School

7 years ago

Does anyone have any data or info on refinancing out of 7a loans?  Pre-payment penalty aside, I'm trying to research what other restrictions/covenants/roadblocks typically exist if we try to refi out of a 7a, 12-36 months into a loan.  Any feedback would be helpful, thank you! 

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3 comments

searcher from The University of Michigan - Stephen M. Ross School of Business

Matt - I have a close connection with a SBA loan representative within Huntington Bank - let me know if you'd like me to facilitate an introduction.

7 years ago | like reply | 0 likes

lender

From the SBA/lender side, the only restriction is that you generally (there are a few rare exceptions) cannot refinance an SBA 7(a) loan with another SBA 7(a) loan. Since you are confined to a conventional loan, it's best to compare the terms. In most cases, you will be better off keeping the SBA loan since it gives you a 10 year amortization and term and your interest rate is 7% or lower. Also, don't forget to factor in the SBA guaranty fee you paid at closing as an additional "lost" cost of refinancing. Many conventional loans will only offer a 5 year amortization. If you can find better terms (or the cash flow of the business can easily support a more aggressive amortization schedule) then the SBA lender can be paid off in full at any time without penalty. In my experience, the terms and cost of the SBA 7(a) loan are almost always better than the alternatives.

7 years ago | like reply | 0 likes

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