How to Refinance a Business Loan in 7 Steps

Are you having trouble meeting your monthly payment obligations? If you have an expensive business loan with high or frequent payments, a loan refinance might be your best strategy.

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A loan refinance is different from loan consolidation in the following ways:

Loan consolidation: The concept of consolidation is bundling separate loans together so you can handle with one payment. It’s a good way to simplify your monthly obligations but doesn’t necessarily save you money.

Refinancing: This strategy is replacing one or more loans with an entirely new loan, ideally one with better rates and terms. The new loan will pay off the expensive loan, leaving you in a better situation. Refinancing is by far the better way to save money.

Here are good reasons to seek out a lower-cost consolidation loan:

  • Less frequent payments
  • Smaller payments
  • Longer terms
  • Lower APR

Here are 7 steps you can take to improve the finances of your business.

1. Determine whether you're in a situation to refinance

It’s important to get a handle on your debts so you know where you stand. Here are elements you need to know:

  • How much you need to payoff current loans
  • Your total amount of loan payments each month
  • The interest rate of each loan
  • The number of months remaining on each loan
  • Payment frequency
  • Penalties for early loan payoff

2. Determine the refinancing goal

Now that you’ve determined your financial situation, nail down why you want to refinance one or more loans and the benefits you’ll gain. Do you want to reduce your monthly payments or lower the total cost of your loan? It’s crucial to establish which goals you’re after before you kick off the process.

3. Put together a list of existing debts

The business debts most often refinanced are high-interest loans with daily or weekly repayment schedules. These loans often include merchant cash advances, short-term loans, and business credit cards. Put together a list of all the loans you’d like to refinance.

4. Review the financial details

“The whole point of a refinance is to bring the cost down,” says Evan Singer, CEO of SmartBiz®, a technology company that specializes in helping small businesses apply for SBA-guaranteed loans. “Do your homework on all the different components of a possible refinanced loan,” he told NerdWallet in a recent interview. Components of a refinanced loan include the interest rate, closing costs and the loan term.

5. Consider the lender options and pick the right one

These days, there are multiple traditional lenders and alternative finance companies competing for your business. But thanks to the internet, it’s easier than ever to vet the companies you’re considering. Take these steps to thoroughly research your options:

  • Check out all rates, fees, penalties for prepayment on the lenders website
  • Research reviews from real customers. Google Reviews, TrustPilot, The Better Business Bureau, and Consumer Affairs are good review platforms to explore
  • Determine if personalized customer service is available via an online chat or phone call to help you explore your options and explain all costs and fees
  • Ask how long the application process will take and time to funding

Remember that fast money isn’t cheap money. If you choose a lender based on speed only, it can do more harm than good.

6. Use an SBA loan as part of refinancing

Without a doubt, SBA loans are the “gold standard” in small business financing. SBA loans available for debt refinance have low rates, a 10-year term, and low monthly payments that won’t cut into your cash flow.

Here are more reasons an SBA loan is an excellent option for refinancing expensive debt:

  • Can help build business credit
  • No prepayment penalty
  • Available nationwide

Additionally, funds from an SBA loan can be used in a variety of ways. If you have funds leftover after refinancing your loans you can use the money for working capital, equipment purchases, additional inventory, hiring, marketing, and more.


7. Apply to lenders

Once you’ve decided that a loan refinance is the right choice for your business and settled on a lender to work with, it’s time to get prepared. The first step is to make sure you meet the eligibility requirements.

These are the eligibility requirements to apply for a $30,000 to $350,000 SBA 7(a) Working Capital or Debt Refinance Loan from banks that participate in the SmartBiz marketplace:

  • Time in business must be above 2 years
  • Business owner’s personal credit score must be above 650
  • The business must be U.S. based and owned by U.S. citizen or Lawful Permanent Resident who is at least 21 years old
  • No outstanding tax liens
  • No bankruptcies or foreclosures in the past 3 years
  • No recent charge-offs or settlements
  • Current on government-related loans

Next, get organized and ready to submit the paperwork required to complete the loan application. Here are documents commonly required to apply for a debt refinance loan:

  • Business financials (past two years)
  • Profit and loss statement (past two years and year-to-date)
  • Projected financials (looking forward one to three years)
  • Ownership information
  • All business licenses
  • All business leases
  • Loan application history
  • Business tax returns (past two years)
  • Personal tax returns (past two years)

You’ll save lots of valuable time by working with a lender who offers great customer service. Questions are bound to come up during the application process and you’ll want swift and accurate answers.

Refinancing Success Stories

At SmartBiz Loans®, we frequently chat with customers who have successfully refinanced existing high interest loans. Here are a few real-life examples:



SmartBiz customer Milton Martinez owns Triple D Towing in Texas. By getting rid of two small loans, he’s saving between $15,000 to $18,000 dollars. That’s money he can put back into growing his business or into savings. He says, “Excellent communication is what made the whole process work. My loan agent was very smart and very responsive. Each time I called or sent an email, he got back to me immediately. I could tell he was 100% on top of everything.”


Mary Grupka and Lisa Scibetta own Painting with a Twist, a studio offering unique art classes and events. They used credit cards and a line of credit to cover the unexpected expansion costs, planning to pay them back easily. However, they found themselves unable to get ahead on paying off the expensive debt. Mary and Lisa secured a $100,000 SBA loan from a bank in the SmartBiz Loans network with low rates and a ten-year term. They immediately put the low-cost funds to work. “Our first step was debt consolidation,” they report. “We were putting out $6,000 a month and now we’re paying $1,100 a month. It’s a significant savings. We’re staying ahead of the curve instead of just trying to keep up.”


Brennen Bliss is the owner of PixelCutLabs, LLC. Although he prefers not to borrow money, he had high interest loans that were crippling his cash flow. He received a low-cost SBA loan through a bank in the SmartBiz network. “We’re using the funds for debt consolidation. My advice is that if you can reduce your interest rates considerably, just do it,” he says. “This loan is allowing us to stay alive and keep growing.”

Visit the SmartBiz blog here to view all of our customer business stories. You’ll meet hard-working entrepreneurs expanding their business and saving money with funds from a low-cost SBA loan. If you have questions about how an SBA loan for debt refinance could help your business, give us a call at 866.283.8726.