To refinance business debt, you replace an existing loan with a new loan at a lower all-in cost (rate plus fees) on terms your cash flow can carry. The test is simple to state and easy to get wrong: the new loan only wins if its rate, origination fees, and repayment term together cost less than the debt it replaces. This guide walks through the five steps, including the SBA 7(a) refinancing rules that trip up most first-time applicants.
What Refinancing Business Debt Means
Refinancing replaces one existing obligation with a new loan on better terms: a lower rate, a different term, or both. Consolidation combines several debts into one new loan; the execution steps are the same. Still deciding which move fits? Start with our breakdown of debt refinancing vs consolidation. If several debts are the problem, the full business debt consolidation guide covers that path.
How to Refinance Business Debt in 5 Steps
Step 1: Audit the Debt You Want to Replace
Pull the current note and write down four things: the interest rate, the remaining balance and term, the monthly payment, and any balloon payment or prepayment penalty buried in the terms. These numbers are your baseline; every refinancing offer gets compared against them.
One classification check before you go further: a merchant cash advance is not a loan but a purchase of your future receivables, and that changes which tools apply to it (more in Step 4).
Step 2: Run the Break-Even Math
Refinancing one debt means beating its rate after fees. Refinancing several at once means beating the weighted-average (blended) rate. Take a worked example: $45,000 at 7% plus $15,000 at 12% works out to ($3,150 + $1,800) ÷ $60,000 = an 8.25% blended rate. A new loan has to come in below that number, all-in, to save you money.
“All-in” is the part owners skip. Origination fees typically run 3%–5% of the loan amount, and they belong in the comparison: a 6% loan with a 5% origination fee is not a 6% loan in year one.
Step 3: Choose Your Refinancing Vehicle
Three product families do most business debt refinancing. Rates below reflect July 2026 pricing, keyed off a WSJ Prime Rate of 6.75%.
| Refinancing vehicle | Typical 2026 rate | Timeline and best fit |
| Traditional bank term loan | ~6.37%–10.98% | Cheapest route, hardest underwriting: strong credit, collateral, a banking relationship. |
| SBA 7(a) loan | ~9.75%–14.75% | Lowest common cost for longer terms. Closing runs weeks, and the SBA’s refinancing rules (Step 4) must be cleared. |
| Online / alternative term loan | ~14%–99% APR (average-risk borrowers cluster 18%–45%) | Funds in days when bank or SBA underwriting is out of reach, but the rate can exceed the debt you are replacing, so the Step 2 math decides. |
The pattern to notice: the cheaper the vehicle, the slower and stricter it is. Refinancing is rarely urgent, so it usually pays to qualify for the slowest product you can.
Step 4: Know the SBA 7(a) Refinancing Rules
If you are targeting an SBA 7(a), often the cheapest option most owners can actually reach, four rules govern whether your refinance is eligible:
- Refinancing is a permitted use. SBA 7(a) proceeds may be used to refinance existing business debt.
- The 10% payment-reduction test. The standard hurdle is that the new installment payment be at least 10% lower than the payment on the debt being refinanced.
- The “unreasonable terms” bypass. Certain debt (balloon maturities, credit cards, revolving lines, and debt priced above the SBA maximum) is treated as being on unreasonable terms and can bypass the 10% test.
- Two hard exclusions. You generally cannot refinance an existing SBA loan with another SBA loan absent a compelling, documented benefit. And a merchant cash advance cannot be refinanced by an SBA 7(a) at all, because an MCA is a purchase of future receivables, not debt. For stacked advances, the tool built for that situation is merchant cash advance consolidation, not an SBA refinance.
On pricing: the SBA caps variable-rate spreads by loan size, from Prime + 3.0% on loans over $350,000 down to Prime + 6.5% on loans of $50,000 or less. At the current 6.75% Prime, that puts the regulated variable ceilings at roughly 9.75% to 13.25%, consistent with the market range above. Read more on our SBA 7(a) loans page.
Step 5: Apply, Compare Offers, and Close
Gather your financials (bank statements, tax returns, a current debt schedule) and apply to more than one lender. Judge every offer on three numbers, not one: the all-in rate including fees, the total repayment over the full term, and your debt-service coverage ratio after the new payment. Lenders underwrite the post-refinance payment against a standard 1.25x DSCR minimum; a refinance that drops coverage below that line is unlikely to clear underwriting, and should not.
Comparing offers is where the savings are. In the Federal Reserve’s 2025 Small Business Credit Survey, 60% of firms that borrowed from online lenders reported higher-than-expected borrowing costs. The fix is boring: get the total repayment figure in writing, from every lender, before you sign.
When Refinancing Doesn’t Make Sense
Refinancing is not always the answer:
- The new all-in rate is higher. If the best offer you qualify for costs more than your current blended rate after fees, refinancing loses money on day one; sometimes the right move is keeping the debt you have.
- The term extension trap. Stretching a two-year obligation into a seven-year one can raise your total interest even at a lower rate. A lower monthly payment is not the same as cheaper debt — separate the cash-flow benefit from the total-cost effect before you commit.
- Prepayment penalties on the old note. If exiting your current loan triggers a penalty, add it to the cost side of the Step 2 math.
- Heavy existing leverage. The Federal Reserve’s 2025 Small Business Credit Survey found elevated existing debt an increasingly common denial reason, which makes leverage a sequencing problem rather than a permanent one. A quarter or two spent clearing the smallest balance and holding coverage steady tends to move the answer further than shopping the same file to another lender.
How REIL Capital Can Help
Refinancing is an arithmetic question before it is a product question, and REIL Capital takes it in that order: the blended rate on what you carry now, the all-in cost of what could replace it, and the total repayment on both across the full term. When those three numbers point to refinancing, the vehicle follows from what you qualify for — a term loan, an SBA 7(a) through our lending partners, or an MCA-specific restructuring if advances are what you are carrying. When they point to keeping the debt you have, that is the answer you get. Apply online to have the comparison run on your own figures.
Frequently Asked Questions
Can you refinance a business loan?
Yes. Replacing an existing business loan with a new loan on better terms is a standard financing move, and SBA 7(a) proceeds may be used to refinance existing business debt. The refinance makes sense only when the new loan’s all-in cost (rate plus origination fees over the full term) comes in below the debt it replaces.
Can you refinance an SBA loan with another SBA loan?
Generally no. SBA rules bar refinancing an existing SBA loan with a new SBA loan unless there is a compelling, documented benefit to the borrower. If your SBA loan’s terms are the problem, conventional bank financing is the more realistic route.
Can you refinance a merchant cash advance?
Not with a conventional refinance, and not with an SBA 7(a). A merchant cash advance is legally a purchase of your future receivables, not debt, so debt-refinancing programs exclude it. For stacked advances, MCA-specific restructuring such as reverse consolidation is the relevant tool.
What credit score do you need to refinance business debt?
Traditional banks typically want 680 or higher. Online lenders commonly work with scores of 600 to 680, and some alternative lenders go as low as 550 to 570 by prioritizing revenue over credit score — though the rate rises as the score floor drops.
