Refinancing Business Debt

Most small businesses end up with debt scattered across multiple lenders, products, and rates — an MCA from a year ago, a working capital loan from a regional bank, an equipment loan from an asset-based lender, plus credit-card balances. Each works alone; together they create cash-flow stress and make existing debt service hard to manage. Refinancing consolidates and (usually) lowers the cost. This guide walks when it makes sense, what product to use, and the actual playbook. For broader context see SBA loans and business term loans.

When Refinancing Makes Sense

Three situations where refinancing pays:

1. Multiple debts at high rates — consolidating 3-5 loans averaging 18% APR into a single SBA 7(a) at 10% saves materially. The math typically shows year-one savings exceeding the refi's closing costs.
2. Cash flow constraint — current monthly payments are eating operating capital. Extending term (5-year to 10-year via SBA) cuts monthly payment 30-40%, freeing cash even at similar APR.
3. Single loan with materially better available rate — existing loan at 14%, new loan at 9%. Cost typically pays back in 8-18 months.

Three situations where refinancing usually doesn't pay:

• Reducing rate by 50-100 bps on a single loan — closing costs eat the savings
• Refinancing 6 months before existing loan matures anyway — just wait
• Refinancing into a longer-term loan with a much higher total cost — cash flow improves but total interest paid balloons

Products That Refinance Business Debt

SBA 7(a) — the workhorse

SBA 7(a) consolidates multiple business debts into one loan at lower rate and longer term. Standard 10-year amortization. Prime + 2.5-3% (≈9.5-11% in 2026). Up to $5M. Requires 10%+ savings on monthly debt service to qualify (SBA rule). Best for: multi-debt consolidation, cash-flow relief, exiting MCAs.

Conventional bank term loan

Refinances single loan at lower rate or different term. 5-7 year typical. 8-13% APR. Best for: borrowers with strong bank relationships, single existing loan to refinance, speed-sensitive deals.

Equipment refinancing

Refinances existing equipment loans. Particularly useful when the original loan's rate is high (often happens when the original loan was specialty/sub-prime) and current market rate is materially better. 24-72 hour close.

Working capital refinancing

Refinances short-term unsecured debt (MCAs, short-term WCLs, business credit cards). Often consolidates multiple short-term debts into one amortizing working capital loan. 3-10 day close.

Commercial real estate refinance

Refinances commercial mortgage when rate environment improves, balloon approaches, or property has appreciated. Cash-out refi can also fund business needs. See cash-out refinance commercial property.

Real Example: $400K Across 4 Loans

Hypothetical small business with:

• $100K MCA, 1.35 factor, $1,950/business-day = ~$3,420/wk for 6 months
• $80K working capital loan, 22% APR, 18 months remaining, ~$5,500/mo
• $140K equipment loan, 14% APR, 4 years remaining, ~$3,825/mo
• $80K business credit cards, 24% APR average, ~$2,400/mo minimum
• Total monthly debt service: ~$25,150

Refinanced into a single SBA 7(a):

• $400K SBA 7(a), 10-year, 10.25% APR
• Monthly P&I: ~$5,348
• Monthly savings: ~$19,800/mo, $238,000/year
• Closing costs: ~$8K (origination + filing). Pays back in 2 weeks of cash flow improvement.

The MCA-and-card-driven monthly payment was the cash-flow killer. Refi unlocks $20K/mo of operating capital. Total interest over 10 years on the SBA is higher than the existing loans combined would have been — but the existing structure was unsustainable. Cash flow is the constraint that mattered.

The Refinancing Playbook

1. Inventory all debt — lender, balance, payment, rate, term, maturity, prepayment penalty. Compute weighted average rate and total monthly debt service.
2. Get payoff statements from each existing lender. New lender pays off existing at close; payoff statements are required documents.
3. Pick the right product — SBA for multi-debt, conventional for single, equipment refi for asset-based, WCL refi for short-term unsecured.
4. Submit complete package — universal docs + debt schedule + payoff statements + 3 years tax returns + financial statements.
5. Underwrite — lender verifies the savings test (10%+ for SBA), runs DSCR on new structure, computes the borrower's improved position.
6. Close and consolidate — new lender wires payoff amounts directly to existing lenders. Old loans close; new consolidated loan is the only debt.

Things to Watch For

• Prepayment penalties on existing loans — especially MCAs and some equipment loans. Adds to total refi cost.
• SBA savings rule — 10% reduction in monthly debt service required for SBA 7(a) refi. Compute upfront.
• Maintaining covenants on the new loan — SBA and conventional loans often have ongoing financial-statement and ratio requirements.
• Same-lender refinances — sometimes the existing lender will modify rather than refi, saving fees. Ask before going elsewhere.
• Don't refi into another short-term product — the goal is to exit short-term high-cost debt, not roll into a different version.

Next Step

Have multiple business debts and want to consolidate? Refinance and consolidate your business debt — one application reaches SBA, conventional, and specialty refi lenders.