Keep in mind these important considerations if you're thinking about refinancing an online business loan. Refinancing debt is not a decision to be taken lightly. It has consequences that can effect everything from credit scores to liquidity.
Business owners should treat refinancing their loan as they would any other significant decision so that they can not only make an informed choice but understand why it is the best course of action for them.
Let’s explore four important business loan refinance considerations for small businesses.
SECURING YOUR LOAN
Your company needs financing, but research and due diligence puts your personal information at risk. The more options you consider, the more vulnerable you become. All lenders want to run your credit and access your personal information. Do not let them. Let Mayava find you the best rate available, safely and quickly without putting you and your company at risk.
Whether the decision to refinance is the result of planning for the future or overcoming the mistakes of the past, time is an important consideration for businesses looking to refinance.
For instance, a company may postpone refinancing if its busy season is about to arrive because the increase in revenue may offset the debt. The company may also decide that if it is about to obtain a larger round of financing, then it might not need to refinance because the saving will be negligible compared to the time and expense involved in refinancing.
If an owner is looking to retire in the near future, then refinancing debt absolutely makes sense because the owner can use that money towards retirement. Even a business owner who plans to close the business can benefit from refinancing because it reduces debt service payments and allows the owner pay down what the business owes.
When it comes to refinancing, business owners should make sure time is on their side.
Having the money to refinance is just as important as having the time. Businesses should consider refinancing debt if their current financial capabilities allow them to do so. A business should not handcuff itself without ample liquidity or enough resources on hand.
Refinancing should only take place if there will be a net positive to the company
Refinancing should only take place if there will be a net positive to the company, such as lower payment amounts or more cash flow at the end of the year. Refinancing for the sake of refinancing is never a prudent financial move.
Picturing what life will be like after refinancing should also be an important consideration. If a lender can provide projections that show smaller payments or even a lower interest rate, then the business owner should take them into account. Lightening the load can improve the company's finantial outlook as well as have a positive effect on morale.
Rates & Conditions
Refinancing a loan not only means re-negotiating principal and interest but also changing the interest rate and specific conditions tied to the loan. By refinancing, borrowers can negotiate a lower monthly debt payment and obtain more favorable terms and conditions.
Refinancing can give borrowers some wiggle room for themselves. It can let them avoid the unpleasant and costly experience of a default or a foreclosure. Lenders typically don't want to go through this experience either since it can cost a great deal of time and money. Being able to refinance debt can provide a more favorable solution for both lenders and borrowers.
Businesses can also negotiate favorable conditions unique to their circumstances. A seasonal business can refinance its debt so that it can make monthly payments when it's actually operating. A business looking to invest in key infrastructure or hire new people in order to improve efficiency and reduce costs might get a boost.
Refinancing debt does not fully wipe the slate clean but it does make trying to rectify a potentially complex situation much simpler.
Improvements to Creditworthiness
Refinancing should only be considered if it can help to improve the borrower's creditworthiness and overall financial situation.
Refinancing should result in a net positive gain to the borrower.
Refinancing can help in several ways. If a borrower still owes the same amount of money but received relief in the form of lower interest rates or a moratorium on monthly payments for a set amount of time, these steps can definitely improve the small business's overall situation.
Refinancing debt is not to be taken lightly. But keeping these considerations in mind will make the process easier for business owners to undertake.