If you’re like most entrepreneurs, you probably have at least one business loan. Maybe you needed money to get your start-up off the ground, or additional cash to help make your business more competitive. Whatever the reason, it’s time to start thinking about the potential benefits of refinancing, and whether it makes sense for your business. To help you make the right decision, here are some questions you should ask yourself…
1. Is your business aging well?
You’ve probably heard that over half of start-ups fail within the first five years. Banks have heard this too, which is why financing start-ups may be considered more risky and could result in higher rates on business loans. However, once your business has matured and has established a financial track record, you may qualify for lower rates on loans. We recommend working with an established accounting firm who can best represent your company’s financials. It’s an investment that will pay you back again and again.
2. When did you borrow?
Rates are always changing. And as of this blog posting, they’re still at historic lows. No one knows how long this will last but one thing is for sure, rates will eventually start to climb. So if it’s been a while since you took out your business loan, now’s a good time to check out today’s rates and see if there are any savings to be had, or, if you can shave some years off your loan without a large monthly payment increase.
3. Has your industry changed?
A changing industry can create unforeseen business challenges. The recession has adversely affected many business models and their underlying cash flows. A refinance of existing debt, with a longer repayment period, could have a positive impact on your business's ability to stabilize and return to growth. And the SBA may be able to help you extend the term of your loan based on your strategy.
Click here to read Bob Polito’s blog post on how SBA loans work. And if you talk to that accounting firm again, be sure your projections and business plan match the term you need.
What have you got to lose?
Now’s the time to revisit your business loan and see if refinancing if favorable. It could save you money and take years off your loan. It could also result in fresh capital to help your business grow and prosper. If you have any questions, feel free to comment below.