If you are a new entrepreneur who is struggling to keep up with the loan payments, or wishes to grow their company, a small-business loan refinance can prove to be a crucial step. Refinancing can help you get lower rates and reduce your periodic payments, thereby getting you out of the debt trap.
In this blog, we will discuss some crucial tips for small-business owners looking to refinance their business loan.
⦁ Make the calculations:
As we mentioned, the main reason behind refinancing is the reduction of the loan cost. So, make sure that you are doing the math on the various loan components such as interest rates, the loan term, and closing costs.
Also make sure that the time dedicated to loan refinancing will be worth it. A refinancing process can take from anywhere between two weeks to several months, so make sure that your refinance gains are not being nullified or even overcompensated by the business revenue that you might be losing.
⦁ Know the right questions:
Some of the basic things to ask about during the refinancing process are:
⦁ The time period over which the loan or financing product will have to be repaid.
⦁ How will the refinancing impact your cash burden.
⦁ The collateral you will have to pledge.
⦁ Conditions surrounding late payments and prepayments.
⦁ The APR (Annual Percentage Rate) compared to other options.
⦁ Spend time in lender selection:
Make sure that the lender reputation and quality are spotless. Make sure to turn to a lender that is committed to honesty and transparency.
Final Word:
While an SBA-backed loan is perhaps the best option for a small business, the flipside is that you will have to endure a rigid application process lasting several months. On the other hand, while an alternative lender might have higher rates, you will be getting the money faster. However, by financing with an alternative lender while going through the SBA application process can help you get the best of both worlds. To explore your refinancing options further, please feel free to reach out to us.
