Benefits of an SBA Refinance Loan to Reduce Monthly Payments

March 25, 2025

In today’s uncertain economic conditions, many small business owners are searching for cost-effective financing solutions to improve cash flow and reduce business debt.

A growing issue for many businesses is the burden of having SBA 7(a) loans with variable interest rates, which can result in much larger monthly payments than originally anticipated.

An effective strategy to solve this issue is to refinance SBA 7(a) loans into SBA 504 loans, which offer fixed interest rates and typically more favorable repayment terms. Learn the basics of an SBA refinance loan, the benefits to local business owners, and how Texas Gulf Bank can guide you through this transition.

The Small Business Administration (SBA) is a federal agency dedicated to encouraging growth by providing a loan guarantee on a portion of the loan amount to eligible small business owners. This helps allow a larger number of businesses to secure the funding necessary for growth.

Understanding SBA 7(a) and SBA 504 Loans

The SBA 7(a) loan program is the most popular Small Business Administration loan option for small businesses because of its funding versatility, including working capital needs, equipment purchases, and real estate acquisition. However, these small business loans often come with variable interest rates, which may lead to unpredictable and potentially escalating monthly payments.

In contrast, the SBA 504 loan program provides long-term, fixed-rate financing for major fixed assets, such as real estate and equipment, to encourage business growth and job creation. The fixed interest rates associated with SBA 504 loans offer stability and predictability, making them an attractive option for refinancing existing variable rate loans.

Texas Gulf Bank has extensive experience helping businesses review their lending and refinancing needs. Our team of experts can assist with the SBA loan refinance process to evaluate whether transitioning your current debt is a sound move.

Why Refinance Debt: Pursue Financial Stability

Although an SBA 7(a) loan can offer significant fund flexibility for your initial financing needs, refinancing your SBA 7(a) loan into an SBA 504 loan can provide several distinct advantages:

Fixed Interest Rates: 504 debt refinancing may shield your business from market volatility and rising interest rates, helping to ensure you enjoy manageable and predictable monthly payments.
Extended Repayment Terms: SBA 504 loans typically offer longer repayment periods than other business loans, which may help reduce your overall loan costs and improve cash flow.
Access to Additional Funds: The SBA 504 refinance program allows cash-out options up to 20% of the property’s appraised value for eligible business expenses. This may provide more working capital for your business needs than what may be available through credit cards or lines of credit.
Improved Financial Planning: With predictable payments and reduced interest expenses, your business may be able to allocate resources more effectively, supporting strategic initiatives and growth opportunities.

Texas Gulf Bank can partner with you to identify if your business is an ideal candidate for SBA loan refinancing and guide you through each phase of the loan transition process.

SBA Refinance Loan Process: Transitioning from SBA 7(a) to 504

Refinancing an SBA 7(a) loan into an SBA 504 loan program with Texas Gulf Bank involves a few key steps. Here is how it works.

Eligibility Assessment: First, we determine if your existing loan qualifies for SBA refinancing under the SBA 504 program. Your business must meet certain eligibility terms, including the original loan being at least six months old, 85% of the original loan being used for buying real estate or certain equipment, and having a timely repayment history.
Appraisal, Environmental and Commercial Real Estate Assessments: These may need to be conducted, as well as any equipment financed by the original SBA loan to establish their current value and ensure compliance with SBA 504 requirements.

Once we determine that your small business’s existing SBA 7(a) loan meets eligibility requirements for refinancing, we can assist you in the loan refinance process working to ensure an efficient and smooth process from start to finish.

Texas Gulf Bank: Your Trusted Partner in SBA Loan Refinancing

Navigating the complexities of SBA loan refinancing requires expertise and a deep understanding of regional business dynamics. Texas Gulf Bank, with over 110 years of experience supporting business growth in the Southeast Texas Gulf Coast region, stands as a reliable partner in this endeavor.

By choosing Texas Gulf Bank as your SBA lending partner, you can benefit from our extensive SBA experience, access to our full suite of business banking services and lending solutions, and our goal to provide exceptional customer service.

As a local bank, we offer in-house loan reviews that are designed to minimize delays in the review process and allow you to focus on business operations.

Secure Your Business’s Financial Future Today

Refinancing an SBA 7(a) loan into a 504 loan could be a strategic move to help stabilize your company’s finances amidst fluctuating interest rates. The benefits of fixed interest rates, extended repayment terms, and improved cash flow may significantly enhance your company’s financial health.

Contact Texas Gulf Bank today to learn how we can work together to help your business secure an SBA refinance loan that meets all your financing needs. Our SBA Loan Specialist is eager to help your business thrive and achieve long-term success.

– To learn more about our business financing options and products, subscribe to our Texas Gulf Bank email newsletter. You’ll receive regular updates about our different business banking services and the latest banking news directly in your inbox.

All loans subject to credit approval