SBA’s requirements for documenting the refinance of debt.
Debt is only eligible for refinance with SBA loan proceeds if the lender is able to document:
– Debt was incurred for an eligible purpose,
– Debt is currently on unreasonable terms,
– Creditor to be refinanced is not in a position to sustain a loss, and
– Refinance of the debt will provide a substantial benefit to the small business concern.

Refinance an existing SBA 7(a) loan with a new SBA 7(a) loan:

New Proposed SBA 7(a) Loan: $1,000,000
Existing Debt to be refinanced: $700,000 SBA 7(a) Loan, $200,000 Line of Credit and $100,000 Business Debts

Reasons why the existing debt to be refinanced is eligible under a new SBA 7(a) loan:
1. Existing Lender was unwilling to extend credit
2. Owner needed to consolidate the Line of Credit and the Business Debts used to finance the business, resulting in a 20% monthly tangible savings
3. All debt to be refinanced was incurred order to refinance ballooning real estate debt
4. Additional cash flow will enable owner to finance the property improvement plan required by the franchise
5. The refinance eliminates the possibility of unnecessary litigation from ballooning debt

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