January 28, 2019 | By Mason Roberts
If you are a small business owner struggling with daily/monthly payments, refinancing your business loan may be a smart financial decision.
In doing this, you can save a large sum of money, either from lower rates, reducing loan payments, or both. It can also reduce the value of the loan. It can save you a substantial amount of money through the term of your loan.
All of this considered, being a small business owner is one of the most appropriate times when refinancing your loan, so be aware of the financial changes happening to ensure you are saving as much as possible.
When refinancing, you must consider all aspects of the process. There are several steps to be taken in order to receive an amazing amount of savings.
1. Calculate Everything
The sole purpose in even considering refinancing your small business loan is to save money, no matter what. That is the overall goal. You are decreasing the cost of your payments. When preparing for refinancing, do the math, do the work. Consider all the components that will play a role in this decision. Being patient and thoroughly thinking through every single possibility will only help you and your small business in the long run.
An option to think about when choosing a small business loan that may be a good candidate for refinancing is a business called Smartbiz.
Smartbiz is an online business that is a viable option for people who are combining their business debt and still want the lowest annual percentage rate possible. With this online platform, business owners are given loans which are dependent upon the Small Business Loan Administration (SBA).
In doing this, Smartbiz is ensuring their customers that they will be offered the most competitive rates on the market at that time. This is what SBA is best known for. They promise the best rates every time.
When choosing Smartbiz, you will always be offered low rates, and along with long repayment periods. Also, the business loan that you will receive can be anywhere from $30,000 to $350,000. The only downfall that comes along with this lender is that you need a fairly exceptional credit score and a dependable business.
If you can guarantee you meet all the requirements, you should be ready to go. Refinancing from this small business loan lender should be no problem, as it is already a pretty reasonable loan option from the start.
Whatever you choose, you still will have to do the math, no matter what. This is an important decision that should be given your undivided attention.
2. Don't Be Scared to Ask Questions
Just like when making any big decision, you should ask any questions you may have before refinancing. You simply cannot come to an educated conclusion if all of your questions are not answered. When refinancing your small business loan, there are some specific questions you should ask, such as:
- “Is collateral required?”
- “What is the payback period?”
- “How are the rates compared to what other lenders offer?”
- “What are the consequences of being late on a payment?”
- “Do I benefit from prepaying during a payback period?”
While there are other questions that will be necessary as the process continues, these are the most important in your initial refinance decision.
3. Be Cautious of Penalties
When deciding on your best loan option, you should be totally aware of the payment process. Make sure that you fully understand everything that the loan is asking of you. You don't want to endure any penalties because you missed something written in the fine print of a contract. If you start missing payment dates or realize you can't pay as much as you initially promised, that will result in penalties that can hurt you financially. It can hurt your small business as well as your independent financial standing, neither of which which is ideal.
4. Be Aware of What Your Lender Is Doing
Paying back a loan is something that is extremely important, for both your financial well-being and your small business. Be aware of what your loan lender is doing or not doing. This is something that cannot be stressed enough.
Your financial obligations are an area in your life you shouldn't be lax with, as the lender might not be doing the best job they are capable of, which will only hurt you over time. Whether you are refinancing or just receiving your first loan, you should always be aware of what's going on.
5. Be Honest and Smart
Whether you are receiving a loan or refinancing one, you should always be honest with your lender about your needs and your ability to repay. They are the ones deciding if you are trustworthy and reliable.
If they find out you are being dishonest with them, whether it's about the kind of revenue your business brings in or the shape your small business is in, they may see it as a major red flag, which can result in negative penalties. Honesty is the best policy.
Another important thing to remember is to be smart when borrowing money. Over-borrowing is another red flag to lenders. If your business already has a lot of debt tied to it, chances are you will not be able to be given another loan.
If you’re in steep debt the lenders will assume that, if given another small business loan, that you will use the money to pay off the debt instead of furthering your business. From there, your finances can most likely spiral out of control, which is something lenders are well aware of.
6. Make a Plan
By now, you should have a good idea of the route that is best for refinancing your small business. Now, make a plan. Figure out which lender is best, which rates are best, and which payback terms are the most ideal. Ask all of the questions you may have. In doing all of this, you will easily be making the most exceptional decision for your small business, which will do nothing else but help build your business’ success.