How to Refinance a Business loan

How to Refinance a Business loan

Published on 2021-08-25

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Loans have, for many years, kept businesses afloat. As the lending industry becomes increasingly competitive, business loans have become a lot more flexible, widely available (you could apply for one online) and strayed away from stringent terms, unlike traditional bank loans. If you have a finger on the pulse of the market and understand the core needs of your business well, you might realise that refinancing your current loan might be good for you and your business.

Refinancing would allow you to get a new business loan to consolidate your existing loans. It will not affect your repayment schedule for the new loan, and you can repay the sum on new terms. All your loans will now come under one umbrella and often with a lower interest rate. 

When does one refinance a loan? 

Well, it is important to assess your present situation. Ask yourself, would it be beneficial for my business to stick with the loan I have? Can I achieve my business goals with my existing financial plan? Finally, one must conduct a thorough survey of the business itself, will a new loan hurt it or improve it? How much will it cost?

How does one refinance their loan? 

  • Weighing Options:

As mentioned earlier, the lending industry is hyper-competitive, there are different lenders offering a variety of options. A ‘refinance calculator’ sums up your financial situation in easy-to-understand figures. Finance brokers may also come in handy, to weigh your options and guide you to the loan and lender most suited to your needs. 

  • Clearing Old Debts:

Once you have chosen the right lender, completed the paperwork, submitted the financial history of your business (going back two years) and received approval, you will be able to pay off old loans. The payment for the new loan usually starts at the end of the first month. 

Benefits of refinancing your existing business loan: 

  • Getting a better deal: If your old loans came with a high interest rate, then ‌refinancing might be a breath of fresh air. These new schemes have lower interest rates giving you a portion of funds you can set aside for your business expansion. 
  • Swell in cash flow: As ongoing payments reduce because of a better rate you might see a rise in cash flow, which is always welcome. Refinancing can provide you with that much needed financial lift. 
  • Freeing up security: If your business has amassed some assets over the years, you can use that as collateral. So, if you, like many business owners have pledged personal assets as collateral for your older loans, refinancing can help you release your personal assets from those old loans, giving you room to breathe easy. 
  • Flexibility: As the lending industry is more innovative and understands the unique needs of every business, they are coming out with products and schemes that are less stringent and more malleable to the small business, giving you a wide range of options friendly to your financial status. 
  • Newfound equity: You can finally access the equity you have painstakingly built over the years. You can use it to make your business more up to date or stow it away for payments in the future. 

Refinancing loans has a myriad of benefits, but it is up to you to figure out whether or not you need it. If you do in fact, need one and find the expanse of options dizzying, CapitalBoost helps small businesses connect with lenders that suit their needs. After understanding the ins and outs of your business, carefully evaluating the feasibility of your options, CapitalBoost helps you get the most out of your refinanced loan. 

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