SBA rules · SOP 50 10 8.1

Can an SBA loan refinance a seller note?

Yes, an SBA 7(a) loan can refinance an existing seller note, provided the note has been in place and current for at least 36 months following the change of ownership.

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

In detail

Seasoning and currency: The seller-financed note must have been in place, current, and not on standby for at least 36 months following the change of ownership.
Payment improvement: The refinancing request must meet the requirement that the new installment payment amount is at least 10 percent less than the existing installment amount in aggregate.
Lender exposure and loss shifting: The refinancing must not reduce the lender's exposure, nor may loan proceeds be used to pay a creditor in a position to sustain a loss or shift a potential loss to SBA.
Tax and balance sheet reporting: The debt must be reflected on the applicant's business balance sheet and on its business tax returns showing the associated interest expense.

The source

What the SOP says

“To be eligible for refinancing, any seller-financed Note must have been in place and current (not on standby) for at least 36 months following the change of ownership. The refinancing request must meet the SBA’s 10 percent improvement to installment payment amount requirement and must not reduce the Lender's exposure.

SOP 50 10 8.1, Appendix 15: 7(a) Changes of Ownership > Debt Refinancing (lines 5107-5111)✓ Verified

“Seller debt structured in conjunction with a change of ownership transaction is eligible to be refinanced after it has been in place and current for 36 months.

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

“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.

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

“When refinancing debt, the new installment payment amount must be at least 10 percent less than the existing installment amount(s) in aggregate.

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

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