Can You Refinance an SBA 7(a) Loan with a CMBS Loan?

CMBS Loans and SBA 7(a) Loan Refinancing

If you’re a business owner that currently has an SBA 7(a) loan on a commercial real estate property, you may want to consider refinancing it with a fixed-rate CMBS loan. This is especially the case if you want to reduce your interest rate— since SBA 7(a) loan rates are typically higher than conduit loan rates. Borrowers with variable-rate SBA 7(a) loans may also want to refinance their loan due to the increased financial security of fixed-rate conduit financing.

Despite the interest rate benefits of CMBS loans, it’s important to realize that nearly all conduit loans are partially-amortizing balloon loans; loans with 5,7, or 10-year terms with 20-25 year amortizations. In contrast, SBA 7(a) loans are fully amortizing and do not require borrowers to make a balloon payment at the end of the loan term. For that reason, SBA 7(a) borrowers looking to refinance with a CMBS loan should be prepared to refinance the CMBS loan again at the end of its term, whether with a bank loan, a loan from a private lender, or even with another CMBS loan.

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