Business Refinancing - If you're a business owner and have borrowed money to fund your venture, it's likely that the recent drop in the prime rate has piqued your interest in refinancing.
There are many factors to consider when refinancing a business loan. Below are a few questions to present to lenders that will help determine whether a refinance is a sound (or feasible) business decision for you:
Will a refinance save my business money? If your sole intent is to reduce monthly expenses, it's likely refinancing your loan at a lower interest rate will provide the solution you're seeking. However, if the term of your loan is being lengthened to accommodate your need for a lower payment, tacking additional years onto your loan could be an extremely pricy venture.
Can I get additional cash? If your business is in need of extra operating capital for inventory, equipment, renovations, or expansion, then a cash out refinance may be a viable loan alternative. Since equity is required for cash out business refinancing, your business will have to pass muster in order to receive approval. (Tip: Some lenders require 97% loan-to-value, while others have loan-to-values as low as 50%.)
Are there restrictions on how I use funds from a cash out refinance? Depending on the type of loan and the lending institution, there may be mandates that dictate how additional funds will be spent. Is your business prepared to accommodate these restrictions?
What are your credit requirements? If your credit has a few dings, you may have to shop around for a specialized bad credit business refinance lender. Be prepared to pay a higher than anticipated interest rate.
Will you work with me if I have stated income? While stated income loans are increasingly more difficult to obtain, you can increase your chances for loan approval by keeping meticulous business records.
Refinancing your business loan may provide the boost your company needs to get through a slump, replenish cash after a catastrophic loss, or fund a new business opportunity. As with most loans, the rates, fees, and requirements vary widely from lender to lender, so be sure to shop around for the best lending scenario.