What are the options for variable rate SBA loan with rates rising?

April 05, 2023

by a professional from Georgia Institute of Technology in Atlanta, GA, United States

I have an SBA loan with variable rate. Since interest rates are rising fast, the monthly payment is increasing accordingly (adjusted quarterly). What are my options? how can I get it converted to a fixed rate so the monthly payment don't fluctuate? Are there any other options? open to suggestions

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

I agree with Heather. Since you cannot typically finance an SBA 7A loan to another SBA 7A loan really the only option you would have is to refinance into another product like a traditional commercial loan. However, there are two things to consider with this. First, a traditional commercial lender is likely going to want to be fully secured or close to it. If you have a lot of goodwill in your transaction, it could be very hard to find a conventional lender to do the loan. Secondly, conventional lenders typically only provide terms on business debt of 5 to 7 years. If there are not a lot of hard assets to secure the loan, you are likely looking at a 5 year term. So even though you might get the interest rate down in the short-term, your payment might go up because you have a shorter amortization on the debt.

Please keep in mind as quickly as interest rates went up they could come back down. I would try to look long-term. Unless you have a lot of fixed assets to justify a shot at refinancing conventionally, you might be somewhat stuck for the time being. If you have additional questions you can ping me here or at redacted

Reply by a lender
in Yorba Linda, CA, USA

Your best option is to contact your lender. Unfortunately, you cannot refinance SBA for SBA - so you will need to ask if your lender can provide you with any options. This can be tricky to negotiate. For example, if the guaranteed portion of your loan was sold on the secondary market, the lender may not be able to make any changes. Or if the business is showing the ability to continue to make the higher payments, the lender may not be willing to make changes. Fixed is usually at least 1% higher than variable, so if you want to convert to fixed now, you may be paying an even higher rate.

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