Are you thinking about refinancing a business loan? Refining is the process of obtaining a new loan to pay off an existing loan. It offers several potential advantages, such as lower monthly payments. There are several things you should consider, however, when refinancing a business loan.
6 Things to Consider When Refinancing a Business Loan
#1) Existing Loan Balance
You should consider the balance on the existing loan that you want to pay off. When refinancing a business loan, you’ll need to obtain a new loan in the amount of the existing loan’s balance. Make sure the new loan amount is sufficient to meet your refinancing objectives.
#2) New Loan Term
What’s the term of the new loan? Some loans have a term of just 12 months, whereas others have a term of three to five years. A longer term length may result in lower monthly payments, but it could also mean paying more interest over the life of the loan. On the other hand, shortening the loan term may increase monthly payments but result in lower overall interest costs. Choose a loan term that aligns with your business’s financial goals and cash flow.
#3) New Loan Interest Rate
Don’t forget to consider the interest rate of the new loan. Lenders charge interest on both consumer and business loans. Interest rates for business loans vary depending on many different factors, such as the term length, the federal funds rate and the specific type of business loan. If you’re thinking about refinancing a business loan, though, you’ll probably want to choose a new loan with a lower interest rate than that of your existing business loan.
#4) Credit
You should consider your credit when refinancing a business loan. Your creditworthiness as a borrower can affect the refinancing options available to you. Lenders may evaluate your credit score, financial statements and business plan. Make sure your credit is in good shape before applying for refinancing.
#5) Business’s Objectives
Something else to consider when refinancing a business loan is your business’s objectives. Why are you refinancing the existing loan? Will your business need additional financing in the near future? Are you planning to expand your business? These are all questions you should try to answer before applying for the new loan.
#6) Collateral
Depending on the type of business loan for which you apply, you may be required to provide the lender with collateral. Collateral is used for secured business loans. Secured
This article was brought to you by Intrepid Private Capital Group, a Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.
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