Just as there are appropriate lenders for certain lending scenarios, there are appropriate scenarios when refinancing a business loan may not be the best course of action.
The commercial financing world is constantly changing, and so are the reasons for pursuing certain financial products and services. Refinancing can help borrowers get a more competitive interest rate, reduce monthly payments and add liquidity.
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.
Here are some important questions business owners should ask themselves when they're thinking about refinancing their business loans.
Refinancing essentially means getting a brand new loan application. Since you are hitting the “Reset” button, you are basically starting from scratch. Once again, you will have to furnish any financial information that was required the first time around. The revenue from your business, your current assets and liabilities, your expenses and even any personal guarantees or collateral will all be reviewed, and they could impact the outcome.
If your ability to pay off your loan comes into question because of your financial situation, it may be best for you to postpone refinancing. This is particularly true if you are planning to make any big changes in your life, such as having children, moving into a new home, or undergoing serious surgery. Lenders will look at these factors too, and they could play a role in influencing the underwriting process.
Whatever the case may be, make sure your financial situation is not cause for concern.
A successful business loan refinance is measured by the benefits it delivers to the borrower. Even a slight reduction in interest rates can have a powerful impact, as shown by the Journal of Real Estate Practice and Education.
Getting a lower interest rate on your business loan may seem like a no-brainer, but it's not that simple.
Refinancing comes with a plethora of associated fees and costs associated with switching from one loan to another, so it’s time to do some serious math and make sure you'll actually save money.
Refinancing usually incurs some combination of exit fees, appraisal fees, application fees, stamp duty or even legal fees. Some lenders might even require insurance, depending on the deal, and that could add up to a substantial expense. It can be a more expensive propostion than you first thought.
Longevity also plays an important part in refinancing decisions. A business owner in their 30’s or 40’s has a longer time horizon than someone in their 60’s or 70’s. How much time does an owner want to dedicate to running their business? That should also factor into their decision about refinancing.
If the owner plans to sell their business within the next few years, then refinancing might be a rather big investment of time and energy with comparatively little short-term benefit. If only a small amount is outstanding on any business loan, then it's best to pay it off because going through the lengthy refinancing process is just not worth it.
Yes, refinancing can help you save money, but consider how much time you have before you decide to go ahead with it. By working with a reputable lender, you will know if the timing is right to refinance your outstanding business debt.