Know your refinancing options
Once you've carefully assessed your financial situation, take a look at some of the most common scenarios where refinancing could help your business. Keep in mind that when you refinance a business loan, you may incur some additional costs.
Lower your interest rates
You may be eligible for a lower interest rate on your loan because rates have dropped since your negotiated your loan. Alternatively, your company may be showing consistent and strong financial performance, which means you could present a lower risk for a lender. This gives you the power to renegotiate a better interest rate.
You may also want to change from a floating interest rate to a fixed rate. If you are looking for peace of mind, a fixed rate provides the same payments for the term of the loan. A floating rate should mainly be considered if variations in your interest payments do not seriously impact your financial viability.
Refinance to consolidate debt
You can consider consolidating a number of debts by refinancing. Essentially, you could get one long-term loan and one easier-to-manage payment per month.
Businesses can also combine larger loans in order to diminish their monthly payments by extending the repayment period of the total debt over a longer period of time.
Leverage assets for special projects
Another refinancing option is to leverage the equity of your fixed assets. This basically means using your buildings or equipment as collateral on loans to get more cash. Refinancing your assets will give you more cash to support projects such as expanding into new markets, restructuring your company or conducting R&D and product development.