If you currently have a business loan or small business administration (SBA) loan but aren’t crazy about the loan’s rate, term, or outstanding balance, you might want to consider paying it off by pursuing a conventional cash-out refinance loan. Doing so can save money and simplify financial matters. But this move can also put your home at risk and lead to higher costs than you expect. Let’s break down how a cash-out refinance works, explore its pros and cons, and look at alternative ways to manage or pay off your business debt.
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SBA Rates
Compared to cash-out refinance loans, SBA loans typically carry much higher rates.
In 2025, SBA interest rates typically fluctuate between 10.5% to 15% (3% to 6.5% higher than the prime rate of 8.5%). The average fixed interest rate for a conventional mortgage cash-out refinance loan, meanwhile, is around 6% – between 4.5% and 8% lower.
Pros and cons of Refinancing an SBA Loan
Here’s a quick overview of the key benefits and drawbacks of using a cash-out refinance to pay off a business or SBA loan:
| Pros | Cons |
|---|---|
| Lower interest rates than typical business or SBA loans, reducing monthly payments and overall borrowing costs | Your home becomes collateral—defaulting risks foreclosure |
| Possible mortgage-interest tax deductions | Extending the loan term to lower payments can add thousands in total interest |
| Consolidates business and mortgage debts into a single monthly payment | Refi process involves paperwork, underwriting delays, and closing costs (typically 2–5% of the loan) |
| Flexibility to shorten or lengthen the repayment period | Tying business debt to your mortgage mixes personal and business finances, exposing personal assets to business risks |
Who is an SBA Refinance Good For?
Good candidates for this strategy include homeowners with substantial equity. Homeowners with high amounts of eqiuty in their home (20% or more) can use a cash-out refinance to secure better loan terms and lower interest rates than typical business loans. This strategy works best for borrowers with stable, predictable income and strong credit histories, since lenders favor applicants who can demonstrate financial reliability. It’s especially appealing for anyone facing high interest rates on existing business loans or looking to boost cash flow.
Check your cash-out refinance eligibility!
How to Qualify For an SBA Loan Refinance
Considering a cash-out refinance to eliminate your business loan? Here’s how the process typically unfolds:
- Assess Your Equity: Calculate how much home equity you have available to cover the cash-out amount and your business debt.
- Review Your Credit: Pull your credit score and reports to confirm you meet conventional mortgage requirements. Refi.com typically requires a credit score of 620+.
- Compare Lenders: Request multiple rate and term quotes to find the most competitive cash-out refinance offer.
- Order an Appraisal: Your lender will require a professional appraisal to verify your home’s current market value.
- Submit Your Application: Complete the cash-out refinance application with your chosen lender, providing income documentation and loan details. The appraisal cost will vary depending on where you live.
- Underwriting & Approval: Wait for the underwriting review, which can take several weeks as the lender verifies your financial profile.
- Close the Loan: Sign the new mortgage documents, pay closing costs (typically 2–5% of the loan amount), and receive your cash-out proceeds.
- Pay Off Your Business Debt: Use the funds from your refinance to pay down or eliminate your outstanding business loan.
Expect the entire process to possibly take 30 to 60 days. This length will depend on many factors, including your creditworthiness and the lender you choose.
Alternatives To a Cash-Out Refinance
If you’d rather not tap your home equity through a cash-out refinance, consider these options for paying down or replacing your small-business debt:
- New Small Business Loan or SBA Loan
- Refinance your current balance into a fresh small-business loan or SBA program.
- Pros: Keeps your home mortgage intact and avoids using your house as collateral.
- Small Business Line of Credit
- Apply for a revolving business line of credit to cover expenses as needed.
- Pros: Flexible borrowing and repayment; interest only accrues on what you draw.
- Home Equity Loan or HELOC
- Borrow against your home equity with a lump-sum loan (home equity loan) or a draw-on-demand line (HELOC).
- Pros: Often lower rates than business-only loans; still uses your home for collateral.
- Private Secured or Unsecured Loan
- Secure financing either with collateral (secured) or without (unsecured signature loan).
- Pros: Fast approval; no mortgage paperwork—though unsecured rates may be higher.
Key Considerations
Be sure to compare the total cost of each option, including closing fees, origination charges, and long-term interest, so you know you’re actually saving money in the long-run.
Keep an eye on current and projected interest rates, since locking in a lower rate now could save you thousands over the life of the loan. Think through your personal and business cash-flow needs and how much risk you’re comfortable taking on before using your home as collateral.
Finally, consider talking with a trusted financial advisor to help weigh the trade-offs and ensure your decision supports your long-term goals.
Check your cash-out refinance eligibility here!
