SBA rules · SOP 50 10 8.1

Can an SBA loan refinance a HELOC used for the business?

Yes, an SBA 7(a) loan can refinance a home equity line of credit (HELOC), provided the applicant certifies that the amount refinanced was used exclusively for business.

Quoted from SBA SOP 50 10 8.1Every quote checked word for word

In detail

Borrower certification: The applicant must certify that the amount being refinanced was used exclusively for the applicant's business and not for any ineligible purpose.
Lender reliance: The 7(a) lender may rely on the applicant's certification; if that certification is later determined to be invalid, SBA will not use it as a basis to deny or repair a guaranty purchase request.
Payment reduction exception: Refinancing a HELOC used for business-related purposes is exempt from the requirement that the new installment payment amount be at least 10 percent less than the existing installment amount.
Payment history and creditor loss: The HELOC must be, and must have been, current for at least the last 12 months or for the life of the loan, whichever is less, meaning no payment was more than 29 days late, and proceeds may not be used to pay a creditor in a position to sustain a loss.
504 program limitation: Under the 504 Debt Refinance without Expansion program, any refinanced line of credit must be in the name of the small business, and qualified debt must be a commercial loan secured by eligible fixed assets.

The source

What the SOP says

“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.

SOP 50 10 8.1, Appendix 14: 7(a) Debt Refinancing Requirements > Home Equity Line of Credit (HELOC) (lines 4945-4952)✓ Verified

“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;

SOP 50 10 8.1, Appendix 14: 7(a) Debt Refinancing Requirements > NOTE (lines 4968-4969)✓ Verified

“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.

SOP 50 10 8.1, Appendix 14: 7(a) Debt Refinancing Requirements > General Requirements (lines 4932-4944)✓ Verified

“The line of credit and/or credit card are in the name of the small business; and

SOP 50 10 8.1, Chapter 1: Eligibility through Submission of Application > Business Lines of credit and business credit cards may be included, if: (lines 3221-3229)✓ Verified

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