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April 4, 2022

Can an SBA 7(a) loan be used to consolidate debt?

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Yes, SBA 7(a) loans can be used to consolidate business debt that is approved by your lender. Business debt can include accounts payable expenses, salaries or payroll, and cyclical debts such as those you incur when you’re starting a business and need to spend more money than you’re currently making.

When you can use an SBA 7(a) loan to consolidate debt

As mentioned, there are multiple types of debt you can consolidate with an SBA 7(a) loan. Here’s an example that illustrates how it could work.

Let’s say you’re running a business that manufactures a product. You purchased the equipment and materials to manufacture the product on your credit card. Meanwhile, you took out a loan to purchase the warehouse where the product is manufactured and to build the website where it’s sold.

Because these were business purchases, you can take out an SBA 7(a) loan to consolidate these separate debts into a single monthly payment.

SBA 7(a) loans are partially backed by the government and distributed by various types of lenders, including direct lenders like us. Each lender will assess your needs and determine if an SBA 7(a) loan is the right solution for your situation.

At BHG Money, we provide a wide range of loan products to cover your personal and professional needs, from personal loans to business loans. We also provide SBA 7(a) loans through our wholly-owned subsidiary, Fund-Ex Solutions Group.

When you cannot use an SBA 7(a) loan to consolidate debt

There are some instances where you will not be able to consolidate your debt using an SBA 7(a) loan. For example, if you have multiple personal debts totaling $50,000 and multiple business debts totaling $100,000, you cannot combine both with an SBA 7(a) loan.

What you can do is consolidate your personal debt with a personal debt consolidation loan and/or your business debt with a business debt consolidation loan, depending on your lender.

Another instance where you may not be able to use an SBA 7(a) loan to consolidate debt is if you mix business use with personal use. Let’s say you purchased a building to open a restaurant, but you used a portion of the building to create a home for your family. The latter is not a business use, so you will not be able to consolidate this debt with an SBA 7(a) loan.

In short, you can use an SBA 7(a) loan for debt consolidation—so long as you meet the requirements of the program and your debts fall under the category of business debts. Want to learn more? Visit the Fund-Ex Solutions Group website today.

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