Your revenue has gone down in 2026 but your loan payments haven’t. Most businesses carry some debt. In the event that the terms of your loan become unreasonable and you can no longer afford the payments, refinancing may be your best option. SBA’s 7(a) program can help small businesses refinance existing debt into lower payments and/or longer loans in some cases. There are a few things you have to consider when you want to refinance your debt. The first is whether there’s room in your finances to pay for a new loan. The new loan should be able to improve your situation, not further exacerbate it.
These loans are backed by the SBA, but the SBA is not lending the money. A bank, credit union or other type of lender extends the loan, but the SBA agrees to repay a portion of the loan if the borrower fails to make payments. Because of that SBA guarantee, the lender takes on less risk, and is therefore more willing to approve your loan. The SBA 7(a) can be used to purchase real estate or land, for working capital, to fund equipment or to refinance existing debt. Because the loan has to be approved by the SBA first, there is often more paperwork, but in general you will get better terms than you would with a traditional small business loan. In some cases, you may even get counseling.
With revenue down, a lender might question if the business is still a good investment. You are going to have to prove with statements and forecasts that the refinancing will have a significant impact on the company. A lower monthly payment that eases cash flow is an example of a significant impact. You will have to meet stricter qualification requirements than with some other business loans.
If you want to use a 7(a) loan to refinance, you generally need to have a credit score of at least 690 and no bankruptcies in the past three years. You will also need to make a minimum 10% down payment. You can’t owe the federal government any money, and you need to have no criminal record (or be able to explain away your misdemeanors). Franchisees must pay the franchise fee upfront, before the money is released. To qualify, the business must be a for-profit U.S. small business that has already put its own money in and has tried every other way to get a loan. If you don’t meet the criteria, you can look at alternative financing to restructure your existing debt. This is not a failure on your part, just another road to finding the financing you need.
Not all debts qualify for refinancing under a 7(a) loan. The lender must see proof that the current debt is on unreasonable terms, such as a ballooned maturity date, or a maturity that doesn’t fit the original purpose of the loan, or an interest rate that is higher than what the SBA allows, or if the debt is on a revolving line or credit card. To qualify for SBA financing on debt refinancing, the original purpose of the debt needs to fall into one of these categories: land, new construction, property improvement, renovations, equipment, furniture, inventory, working capital, or business acquisition. For refinancing the original debt, there also needs to be a significant benefit to the small business. The SBA won’t allow refinancing of a loan simply because it sounds “nice” - they will determine the benefit.
You can refinance business credit cards if they are used strictly for business expenses. If you have any personal charges on the card, it won’t qualify. The card debt will have to be coverable by the SBA loan, either partially or fully, or with other collateral.
Lenders will require you and any partners with a 20% or more stake in the business to put up a personal guarantee if you apply for a loan. If you are married, a spouse with a 5% stake also must guarantee the loan, as long as the combined marital stake is at least 20%. For instance, if your spouse owns 5% and you own 15%, your spouse must also sign. If you are a sole proprietor, you sign the loan as the borrower, so no separate personal guarantee is necessary.
The paperwork for a new loan application includes SBA Form 1919 (borrower info), Form 912 (statement of personal history), Form 413 (personal financial statement), and your company’s financial statements, including a balance sheet, profit and loss statement, and a projection of your income. The lender will also want details about your business - for example, your type, size, age, location, and industry. And of course they’ll need your legal name, address, and immigration status. In order to show that the debt you want to refinance actually qualifies, you need paperwork that shows the original loan’s terms, how much you still owe, and who the lender was. You’ll also need a record of what the original loan was used for, as well as financial statements and projections that prove that refinancing is really going to help your business. You can bring in a lawyer or translator to help you fill out the forms, but the lender has to tell the SBA who was helping.
A Cafe in Bethesda, Maryland
Consider an example. Sarah opened a cafe in Bethesda, Maryland. She developed a loyal following. Sarah upgraded the seating area and kitchen equipment, which she financed with multiple high-interest short-term loans from various lenders. The extra monthly payments knocked a significant chunk of her cash flow, which meant she had less to put back into the business. Sarah discovered she could use an SBA 7(a) loan to refinance. She applied for the loan at a local bank. After scrutinizing her finances and how the cafe is doing, she was approved for a 10-year, $150,000 7(a) loan at a low fixed rate. She consolidated her high-interest debt into one loan with a longer term, so her monthly payments are now lower giving her some immediate cash flow relief. That breathing room let her put money into marketing and menu development. Her cafe was doing well; if yours is struggling, the financial statements and projections carry even more weight.
Here’s the bottom line: A decrease in revenue doesn’t automatically mean you’re ineligible to refinance your small business loan through a SBA 7(a) loan. However, there are very specific requirements that apply to the owner, the business, and the existing loan. And you have to prepare for an extensive application process. So the best thing to do is start gathering paperwork as soon as possible. If your loan does not meet the guidelines, you’ll have to explore other options for small business financing to refinance your debt.
