SBA SOP 50 10 8, B.Ch2.A.1 — Debt Refinancing
Verbatim text of SBA SOP 50 10 8 section B.Ch2.A.1 (Debt Refinancing), effective 2025-06-01. 7 provision(s) quoted from the SOP PDF. SBA's own document page serves superseded editions, and the SOP is further amended by policy notices — read this with the notices that touch it.
See also
SBA lending corpus: SOP 50 10 and the active notices, with the expiry watcher.
Verbatim regulatory text
Verbatim provisions from SBA SOP 50 10 8, B.Ch2.A.1 — Debt Refinancing — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
SOP 50 10 8 B.Ch2.A.1
1. Debt Refinancing 13 CFR §§ 120.140(j)(1) and 120.201 SBA-guaranteed loan proceeds may not be used to pay a creditor in a position to sustain a loss (including the same institution’s debt). This includes any refinancing that will shift all or part of a potential loss from the original lender to the SBA. The debt to be refinanced must be, and must have been, current for at least the last 12 months or for the life of the loan, whichever is less. “Current” means that a required payment has not remained unpaid for more than 29 days. A loan that has matured and not been paid within 29 days of the maturity date is not current and is not eligible for refinancing. Loan proceeds may be used to refinance the following types of business debt. i. Any debt structured with a demand note or balloon payment; ii. Debt with an interest rate that exceeds the SBA maximum interest rate based on size or term;
SOP 50 10 8 B.Ch2.A.1.ii.iii
iii. Credit Card Debt Used for Business Expenses - The Applicant must certify that the proceeds from the debt were used exclusively for the Applicant’s business and were not used for any ineligible purpose as set forth in 13 CFR § 120.130. If a Lender submits a loan with proceeds refinanced from credit card debt where the Applicant certified that the proceeds from the debt were used exclusively for the Applicant’s business, but the Applicant certification is determined to be invalid, SBA will not use this as a basis to deny or repair the guaranty purchase request. The Lender can rely on the Applicant certification;
SOP 50 10 8 B.Ch2.A.1.ii.iv
iv. Debt that is over-collateralized based on Standard 7(a) collateral requirements–- see Paragraph C.3, Collateral below, which describes SBA’s collateral requirements used to determine if a loan is “fully secured;” v. Revolving lines of credit (short-term or long-term) where the original lender is unwilling to renew the line, or the Applicant is restructuring its financing in order to obtain a lower interest rate or longer term;
SOP 50 10 8 B.Ch2.A.1.ii.vi
vi. Debt with a maturity that was not appropriate for the purpose of the financing (e.g., a 3 year term loan to finance a piece of equipment with a useful life of 15 years); vii. Debt used to finance a change of ownership of a going concern business; a) To be eligible for refinancing, any seller financed note must have been in place and current (not on standby) for at least 24 months following the change of ownership. The refinancing request must meet the SBA 10 percent improvement to installment payment amount requirement in Paragraph f. below. b) If the change of ownership is between existing owners of a business and existing business debt will be refinanced as part of the transaction, the refinancing must meet the requirements set forth in this section. c) If the existing debt is SBA-guaranteed and with the same Lender Same Institution Debt (SID), the application can be processed under PLP authority. d) Paying off debt as part of a change of ownership is not a refinance of debt. In a complete change of ownership situation, the option to assume the existing SBA debt should be offered to the buyer.
SOP 50 10 8 B.Ch2.A.1.ii.viii
viii. Debt reflected on the Applicant’s business balance sheet is eligible for refinancing if the debt is reflected on the Applicant’s business tax returns (Schedule C for sole proprietorships) showing the interest expense associated with the debt. ix. Home Equity Line of Credit (HELOC): If the debt is in the form of a HELOC, the Applicant must certify that the amount being refinanced was used exclusively for business. If a Lender submits a loan with proceeds refinanced from debt in the form of a HELOC where the Applicant certified that the proceeds from the debt were used exclusively for the Applicant’s business but the Applicant certification is determined to be invalid, SBA will not use this as a basis to deny or repair the guaranty purchase request. The 7(a) Lender may rely on the Applicant certification. x. A Lender may refinance an existing non-SBA-guaranteed loan or Borrower debt from another lender if the new loan meets the SBA 10 percent improvement to installment payment amount requirement in Paragraph f. below. Merchant cash advances and factoring agreements are not eligible for refinancing. Refinancing Same Institution Debt (SID). Refinancing of SID may not be processed under a Lender’s PLP or SBA Express authority. In addition to the requirements in this subparagraph, the conditions of this section (Para. A.1.) must be met. i. An SBA-guaranteed loan may not be used to refinance SID where there is an appearance that the Lender will shift to SBA all or part of a potential loss from that same debt. (13 CFR § 120.201) ii. The Lender must submit the loan via E-Tran to SBA for non-delegated processing and: a) Include a transcript showing the due dates and when payments were received as part of its analysis and recommendation for the prior 36 months, or the life of the loan, whichever is less; and b) Explain in writing any late payments and late charges that have occurred during the last 36 months. (Late payments are defined as any payment made beyond 29 days of the due date.) iii. SBA does not consider the following to be refinancing of SID: a) The debt is an interim loan that has been made for other than real estate construction purposes and was approved by the Lender within 90 days prior to the issuance of a PLP loan number; or b) The debt is a construction loan that has not been disbursed at the time the PLP loan number is issued.
SOP 50 10 8 B.Ch2.A.1.ii.iv
iv. Refinancing a same institution 7(a) loan. A Lender may refinance its own 7(a) loans only by submitting the loan via E-Tran to SBA for non-delegated processing and only if: a) It is unable to modify the terms of the existing loan because a secondary market investor will not agree to modified terms, or b) An increase in the amount of an existing SBA-guaranteed loan is not possible. Refinancing a 7(a) loan of another Lender. Proceeds may be used to refinance existing 7(a) loans from other Lenders provided the conditions of this section (Para. A.1.) are met. Any applicable subsidy recoupment fees will apply. Refinancing an SBA 504 loan. Refinancing an existing 504 loan can be processed by non-delegated or delegated PLP or SBA Express authority if: i. The conditions of this section (Para. A.1.) are met, and either; a) Both the Third Party Loan and the 504 loan are being refinanced; or b) The Third Party Loan has been paid in full and the 504 loan needs to be refinanced as part of a larger transaction to provide funding for expansion of or renovations to the Project Property. In either case, the justification to refinance the existing SBA-guaranteed 504 loan must be included in the credit memorandum and submitted to the LGPC with the application. c) Any applicable 504 prepayment penalties will apply. d) The 7(a) Lender may not solely refinance the Third Party Lender’s loan for an existing 504 project. Ten Percent Improvement to Installment Payment Amount. When refinancing debt, the new installment payment amount must be at least 10 percent less than the existing installment amount(s). If other debt is being refinanced at the same time, such debt may be included in the installment payment improvement calculation. If the note terms include an escalating payment structure, the new installment amount must be at least 10 percent less than the expected installment amount within the next 12 months. The following exception applies: Debt (short- term or long-term) structured with a demand note or balloon payment, credit card obligations and HELOC used for business-related purposes, and revolving lines of credit (short-term or long-term) where the original lender is unable or unwilling to renew the line or the Applicant is restructuring its financing in order to obtain a lower interest rate or longer term; When refinancing debt, the loan application must include: i. A written analysis that addresses the following issues: a) The reason the debt was incurred; b) The factor(s) that support that the proposed refinancing will not pay a creditor in a position to sustain a loss; c) The reason for restructuring the debt (for example, over-obligated or imprudent borrowing); d) The factor(s) that support that the debt being refinanced is not currently on reasonable terms; e) How the new loan will improve the financial condition of the Applicant; f) An itemization of all debts being repaid by loan proceeds when the individual creditor is to be paid $10,000 or more; and/or the loan number and dollar amount of any existing SBA being debt refinanced. g) The reason(s) the Lender believes the debt to be refinanced no longer meets the needs of the Applicant; and
SOP 50 10 8 B.Ch2.A.1.ii.ii
ii. Supporting documentation for each debt to be refinanced: Lenders are required to: a) Retain copies of the note(s) being refinanced, security agreements, leases, and other documentation evidencing the debt to be refinanced. If submitting to LGPC for non-delegated processing, Lenders must include this documentation with the application. b) Include, when applicable, a copy of the most recent credit card statement evidencing the holder of the account and the current balance. The E-Tran Terms and Conditions must include: i. In the Use of Proceeds section, the refinancing must be specifically identified; ii. An itemization of all debts being repaid by loan proceeds when the individual creditor is to be paid $10,000 or more; and/or iii. The loan number and dollar amount of any existing SBA being debt refinanced. Other conditions that apply to debt refinancing: i. A 7(a) loan may not be used to refinance a debt owed to a Small Business Investment Company (SBIC) or a New Markets Venture Capital Company 13 CFR § 120.130(b). ii. The payment of trade payables is not considered to be debt refinancing. iii. For loans processed under a Lender’s PLP authority, SBA does not consider the following to be refinancing SID: a) The debt is an interim loan that has been made for other than real estate construction purposes and was approved by the Lender within 90 days prior to the issuance of an SBA loan number; or b) The debt is a construction loan that has not been disbursed at the time the SBA loan number is issued. Interim Advances: For loans processed on a delegated or non-delegated basis, after the loan has received an SBA loan number and prior to disbursement, a Lender or an affiliate of the Lender may make interim advances (also known as bridge loans) and 7(a) loan proceeds may be used to reimburse the interim advances. Lender notification to SBA of such advances is not required.
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