Most businesses go through cycles of growth, and at some point, you may need to free up some cash flow or you may be prepare for the future. Either way, it’s important to weigh all of your options before making a decision.
There are several factors to consider when refinancing your business. Interest rates are, of course, one of the most significant considerations, but there are others as well. Like a home loan, you will need to compare the terms of different refinancing options to find the options that suit your circumstances and business goals.
Gathering information is essential in making an informed decision. It is important to compare different lenders’ interest rates and other terms. Once you have all the information, you can make an educated decision about whether or not refinancing is the best option for your business.
To help you understand refinancing your business, this article looks at 5 key factors you should consider.
1) Determine if refinancing is the right option for your business
Businesses can obtain loans from many different lenders, and many kinds of loans are available. The most common business loan is granted for purchasing assets, such as land or business.
Other common types of loans include credit cards and the line of credit. These are typically short-term loans that can be used for various purposes, such as spending money quickly or for emergencies.
Each type of loan has risks and rewards that should also be considered when refinancing a business.
If you are considering refinancing, it is vital to understand all the costs involved in changing lenders.
Finally, you may consider chatting with your accountant or financial advisor, who can help you to develop your business plan and cash flow forecasts. This can help us source the information we need to find competitive options for you.
We work as part of your finance team, and understanding what you want to achieve helps us find suitable loan options that suit your business circumstances, structure and goals.
2) Compare interest rates and options from different lenders
Each lender has its own assessment criteria, and gathering the correct documents they require can be arduous. We not only go to market and find loan options that suit your business, we also work with you to understand the documents needed for each lender and manage the application process for you.
We do the leg work and can guide you through loan structures and interest rates that suit your circumstances.
When assessing your application, some of the considerations of a financier include:
- Do you have existing debt on your company records?
- Do you have a good repayment history for previous debts?
- Can you provide your business’s financial statements, and is your business financially stable?
- Do you have a solid business plan in place?
- How much do you want to refinance?
- What are the current interest rates, and what is your repayment capacity?
- What kind of severance will they be entitled to, or can you keep your current employees?
The stronger case we can present to a prospective lender, the better our position is to secure you a competitive option.
3) Negotiate lower interest rates with your current lender
Depending on the market and your repayment history, we may be able to negotiate a lower interest rate or more suitable loan structure with your current lender.
Some clients prefer the convenience of staying with their current lender if the lender can provide a competitive option.
This is typically negotiated case-by-case and depends on your unique circumstances.
4) Compare the terms of the different refinancing options
A business loan is a significant financial decision that can considerably impact your business. Our team knows what to look for and can walk you through your loan options and the terms and conditions of your new loan.
We will walk you through every step and simplify the process so you can make an informed decision.
5) Does your mortgage affect your business borrowing capacity?
A business loan in your name could impact your credit history like any other loan. A poor credit rating from your personal loans may affect your options when securing a Business Loan.
Similarly, in certain circumstances owning your home can affect your capacity for a business loan. For example, if you own your home outright with no mortgage, your lender will likely accept that as security for your loan.
If you have used other assets to secure your Business Loans or have large outstanding personal loans, these can affect how much your financier may be willing to lend you.
Conclusion
Like a mortgage, your Business Loan is funded by a financier (such as a bank). When choosing the right financing option for your business, we need to consider your assets, cash flow, time in business and business goals. These are just some factors that will influence what type of loan suits your needs.
As your business finance broker, we do the hard part for you. We have a substantial panel of lenders. We work for you; we research and negotiate solutions that suit your business needs.
Disclaimer:
Terms are subject to approved persons only. This information is true and correct as of 17/10/2022. All of the content above is general in nature and may not suit your personal needs, situation objective & goals.
