What you may not have considered, is the possibility of refinancing an existing business loan. Doing so could allow you to reduce your monthly loan payment, pay off your loan faster, consolidate debt, or even allow you to obtain additional cash for your business. While not all business loans can be refinanced, certain types such as terms loans, business lines of credit, equipment loans, and commercial real estate loans may be eligible.
Below we take a closer look at business loan refinancing, so you can help determine whether this option might make sense for your business:
Common Reasons to Refinance a Business Loan
There are several possible reasons why a business owner might consider refinancing a business loan. Refinancing might make sense if:
• Your business is more financially stable and has a higher credit score than it did when you first took out the loan. If your business’s financial situation has improved since you first secured financing, you may be able to qualify for more favorable loan terms than you initially did.
• Interest rates have declined by at least one point since your business loan was taken out. If you’re able to take advantage of a lower interest rate on a business loan, you could potentially reduce your monthly payment, or reduce your loan term to pay off the loan faster.
• You’re interested in a longer-term payment schedule, to help reduce your monthly payments. Lower monthly payments could potentially help alleviate cash flow concerns for your business.
• You want to consolidate your business loans. If you currently have multiple loans for your business, you could potentially refinance them into a single loan, with a more manageable monthly payment.
• You need more capital for your business. If you’re able to refinance your current loan with a larger loan amount, you could use the additional cash to expand or grow your business.
If any of the above are true of your business, refinancing might be a good option for you. At the very least, it could mean you are ready to talk to a business expert about the option of refinancing.
How to Refinance a Business Loan
If you believe that a business loan refinance might make sense for your business, you could explore the options available to you. To start, it would be wise to sit down with a business accountant, financial planner or business banker to discuss the current financial situation of your business, as well as your short-term and long-term business goals. These professionals can assist you in determining what debts make the most sense to restructure, and they can also help you determine the size and type of loan that would best suit your business.
You should also consider a few different business lenders. Compare rates and terms to ensure you’re getting the best financing available. You should also determine whether collateral will be required for the new loan, and what fees and closing costs you’ll be responsible for. It’s also important to find out if the new loan will have any prepayment penalties associated with it.
Every business has different financial needs, so a business loan refinance might not be the best fit in every situation. However, in certain circumstances it could be a helpful way to better manage business debt or obtain the capital you need. Regardless of whether you ultimately decide to move forward with a refinancing for your business, taking the time for a financial checkup and analysis of your business will undoubtedly be beneficial, and help you to better manage your business’s finances and goals moving forward.
If you are interested in business refinancing options from BankFive, schedule a consultation with one of our dedicated Business Banking experts today.