After spending several years making regular payments, you might be wondering, “How do I refinance my business loan?” Thanks to a variety of options made available by the Small Business Administration (SBA), refinancing is easier than you might think. You simply need to work with someone who can help you navigate the application process and get the best terms possible. And the benefits of a refi include a potentially lower interest rate, extended repayment terms, or both.
Understanding How Refinancing a Business Loan Works
The refinance process generally involves three key steps. First, you want to identify how much you owe by reviewing your current loan balance and interest rate. Also note the terms of your existing loan, as any new loan you obtain should have more favorable rates and terms.
Keep in mind you may also be able to consolidate other existing debts. This allows you to roll several loans into one and make a single, affordable payment each month. Doing so not only makes budgeting easier but can similarly shorten your repayment schedule and lower your interest.
Gather the Necessary Paperwork
You’ll also need to gather evidence showing your business can repay a new loan. Some of the paperwork a lender might request include:
- Cash flow history and future projections
- Balance sheet
- Business plan
- Credit history
- Accounts payable
Having this documentation prepared ahead of time can help the loan process move smoothly. It may also prevent delays so you can get approved quickly – and start saving money sooner.
It’s crucial that you research several different lenders to compare repayment schedules, interest rates, fees, and loan terms. Many times, lenders can do a “soft” pull so your credit rating isn’t initially affected. You should also ask questions to understand the refi package available to you, such as:
- What closing costs and fees are involved?
- Is collateral required?
- How much will your monthly payments drop?
Before you officially commit to a loan, ensure the lender offers amenities like:
- No prepayment penalties
- Flexible payment terms that work with any budget
- Experienced professionals who understand your financial needs
- Accessibility so your call is always answered
The Lending Process
Once you’ve chosen a lender, the application process will move in much the same manner as that of your original financing. The lender will do a “hard” pull on your credit and evaluate your business history and income using the paperwork we mentioned earlier. Once you’re approved – some lenders can turn around your application in just 24 hours – you’ll be on your way to improved financial health.
Reasons to Consider a Refi
We previously mentioned a refi can often provide a better rate and help you save money in the long run. With more cash flow, you can invest in inventory, equipment, or other aspects of your business. Alternatively, based on your debt-to-income ratio, you may get approved for a larger loan amount that provides additional funding for your business.
A refi can also help boost your credit score. This is especially true if you plan to consolidate several small short-term loans into one. By reducing your credit utilization ratio, your credit score may improve in just a few short months. Your company may then be more attractive to lenders in the future.
You’re Unhappy with Your Current Loan
It’s appropriate to apply for a refi for no other reason than if you feel unhappy with your current loan. Whether you have a looming balloon payment or other terms and conditions dragging down your business, a refi can get you into a more comfortable situation. And this, in turn, will allow you to focus on what’s important: growing your business.
A refi can be a viable way to reduce your organization’s debt load, increase your credit score, and save money. And the process to do so is incredibly easy, especially when you choose Funding Well Capital (FWC). We have successfully provided funding to companies of all sizes and with a variety of needs. To learn more and/or see if you qualify, complete a short form on the FWC website today.