Articles

Smart Tips to Refinancing a Small Business Loan

by Amrita Agarwal Digital Marketing Manager

Refinancing either a personal or a business loan is done when a borrower finds it risky to live with that loan. A refinance is done to obtain a better loan, better services and of course some savings. Refinancing a business loan often increases the cash flow and make a borrower enjoy a comparatively low-interest rate. During the life of the business loan tenure ( which may be as long as 20 years!) if the business loan rate has fallen down or the EMI amount started to feel burdensome than a refinance is the best way to bring everything back to track.

WHY A BUSINESS LOAN REFINANCING MAKE SENSE?

Here are the reasons why a business loan refinance is appreciated as a good financial decision.

Finding A Lower Rate- A refinance is done when you know that the present business loan rate is lower than your existing loan. During a long tenure, this may happen on many occasions that the rate of interest has been fallen down. With a refinance, one can find a better deal. A lower interest rate will bring your EMIs lower and you can use the extra funds to invest back into the business.

Reducing Your Loan Repayments- The total cost of borrowing can be lessened with a refinance. Hence you can free up some additional amount which can be used in better ways to expand your business.

Switching To A Fixed Rate- Any kind of loan interest rate come in two forms- Fixed interest rate and Floating interest rate. Let's say the interest rate has recently fallen drastically and you hope that it cannot go lower than that. In such scenarios, you can opt for a refinance and change your loan to a fixed interest rate. So, once your loan is refinanced, you will be enjoying the same low-interest rate until the end of the tenure. The fluctuation of the market will not affect your credit.

Increasing Cash Flow- One can increase cash flow by refinancing. A refinancing is done not only to reduce the interest rate, it is also done to change the loan structure. One can change the EMI amount or the tenure with a refinance. One can make the EMI smaller to maximise the cash flow or even increase it to complete repayment sooner than the pre-fixed time frame.

Making It Easier To Manage Your Debt - It may happen that a person is servicing a number of loans at a time which is getting difficult to manage. In such situations, one can go for a refinance and bring all the credits under one umbrella. Once can close many credit accounts and run a single account to make the repayment process simpler. Paying many EMIs of a different amount at different dates of a month can be confusing for any person.

Releasing Security Over Personal Assets - Along with each EMI, some amount of the principal is repaid. After some years of servicing the loan, it is obvious that the principal is less than which you have actually taken. So with a low principal amount now you may change the collateral. Let's say at the starting of the loan you have used your home as a collateral, but after some years your business has its own assets which can be used as collateral. If it happens, then you can release your home and can use business assets as a business loan collateral

Taking Advantage Of Tax Benefits- With the help of a tax specialist or your accountant one can get a negative gearing and depreciation benefits.

HOW TO GAIN MAXIMUM BENEFIT WITH A LOAN REFINANCE?

The experts of business loan explain that gaining the best results by a refinance needs more study than how to get small business loan. Here are a few tips which will help you take to make the right decision on your refinance.

Find How Much Can Be Saved- A refinance is done to save some amount but it should be a matter of concern how much one can save by doing a refinance. A refinance is a lengthy process which demands lots of time and effort. One must calculate well in advance how much of profit can be earned by doing the refinance. If the profit is nominal, then it will be better to be with the same lender. The profit that can be earned by a refinance depends much on the outstanding principal amount and the tenure.

Pick Lender Cautiously- The lender with whom you are going to sign the loan agreement must qualify all the criteria which you are looking for. Once you sign the agreement, you will have to be with the same lender at least for next 12 to 18 months. One must read the fine print very carefully so that he doesn't need to face shocks and surprises in near future.

Watch For Penalties- There may be some penalties while closing the existing credit account. Not even that one has to pay the origination fee to the new lender. The net profit must be calculated after deducting all the payables. While calculating the possible profit, one must not ignore the penalties.

When you take a calculated decision, a refinance will definitely bring some sort of relaxation both financially and physiologically. Once the refinance is successfully done, one must check their credit report. The activity of refinance must be updated in your credit report which will enhance the credit score on the go.



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About Amrita Agarwal Freshman   Digital Marketing Manager

9 connections, 0 recommendations, 29 honor points.
Joined APSense since, July 14th, 2016, From Bangalore, India.

Created on Feb 23rd 2018 00:44. Viewed 1,255 times.

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