5 benefits of refinancing your small business loan
When it comes to small business loans, many business owners assume that it’s the best course of action to stick with your lender and loan terms as approved. However, the business lending industry is becoming more competitive, especially with an increasing number of fintechs and online lenders, providing much more flexible small business loan terms.
Therefore, it’s wise to stay on top of market trends and be open to potentially refinancing your business loan when it’s beneficial. Simply put, refinancing means that you get a new small business loan to repay your existing loan while also continuing with your ongoing repayments of the new loan as per the new repayment terms. Easy peasy.
So, why should you consider refinancing your business loan? Here are 5 key benefits showing how refinancing can help your business.
Getting a better rate
One of the most common reasons for borrowers to refinance their existing loan is to get a more affordable interest rate, which can save you a lot of money in the long run. It’s also money that you can reinvest back into your business. If you’re looking for some inspiration on growing your business, check out our article “5 effective strategies to grow your business”.
Increasing cash flow
Getting a better rate can also reduce your ongoing repayments and therefore help increase your cash flow. And what business owner would not want a bit more cash in the bank? We understand that managing cash flow can be a real challenge for many small businesses. Refinancing your small business loan could provide you with an instant boost.
If you have more than one loan, refinancing can simplify debt management by consolidating these into one single loan. Instead of organising repayments for multiple loans, you’ll only need to repay one. This can make your life a lot easier and save you some valuable time, which you can spend on your business instead. Consolidating debt could even potentially increase your overall credit score, which can positively impact your borrowing capacity.
Getting more flexible small business loan terms
Another great benefit is that by refinancing your current loan, you might be able to get access to new loan features with more flexible loan terms that your existing loan doesn’t offer. Keep an eye out for the fintechs and online lenders that are constantly innovating the small business lending offering through more flexible business loan products.
Leveraging your equity
When you refinance your small business loan, you might also get a chance to access some of your business’s equity. You could use it to either grow your business or to release existing security over your personal assets and leverage business assets if applicable.
Refinancing is all about saving you money and getting you the best possible lending terms. It is most beneficial for consolidating multiple loans into one business loan, getting a loan with a more affordable interest rate or leveraging your business’s equity. However, in some cases, the cost of refinancing could outweigh the benefits, so you should definitely research and analyse your options before making a decision.
If you consider refinancing your small business loan, you should follow the three steps below to get the process started.
✔️ Decide whether refinancing is the best option to achieve your business goals.
✔️ Once you have made your decision, research options, both with your current lender and other business lenders. If you’re going for a new lender, make sure to also prepare your elevator pitch to successfully pitch your business to a lender.
✔️ After you’ve chosen your lender and loan product, apply for your new loan. If you would like to know more about our minimum requirements here at Lumi, check out our article “Are you ready to apply for a small business loan?”
Still got more questions about refinancing your small business loan and would like to discuss your options with industry experts? Please reach out to our team, who will be very happy to help.
If you’d like to apply for a small business loan with Lumi, you can do so here via a simple 5 min online application.
Your Lumi team