The Easy Steps to Refinancing Business Loans
Applying for refinancing business loans means getting a new loan. While it can be fairly simple, it is a critical step if you are looking to expand your company, especially if you are already struggling with your finances. Usually, business owners use the new credit to pay off their current loan. Moreover, since a business loan doesn’t need to be regulated by the National Consumer Credit Protection (NCCP) act, the lenders can be more flexible with the terms and conditions.
To ensure that the loan application goes smoothly, take into account the following tips!
Start working on your loan before it’s desperately needed
Be smart and start considering the possibility of refinancing business loans beforehand. Start building relationships with your lender and let them know about your company’s profile before you ask them for anything. Remember that in today’s business world, networking is an essential tool in having a successful business.
Think about why you need the money
Make a list of pros and cons to see why you need to apply to one of those refinancing business loans out there. Here are some examples of really good reasons for taking a loan: equipment, real estate, software development. Some bad reasons could be: financing ongoing losses or buying non-essential business equipment.
Make sure the loan is to your advantage. Make some calculations!
Keep in mind that the whole purpose of applying for refinancing business loans is to considerably reduce the costs. Make your research about the interest rate, closing costs, and the loan terms.
Determine if the time you will spend on refinancing procedures will be worth the effort. Sometimes, it might take months. Is it worth the time?
What you need to consider before applying for business loans
Before refinancing, make sure you take every single aspect into account:
- Consider your goals. Why do you need the loan? Determine why you want to refinance and how it is going to improve your business afterward;
- If you refinance, prepare yourself for some additional costs for valuation fees, government fees, settlement fees, and many other;
- You will need to add an enquiry to your credit file, that will summarise your financial rate.
Know what questions to ask
Keep these questions in mind:
- How much time will take to pay back the loan?
- What collateral will you need to guarantee?
- What are the conditions for early/late payment?
- How is the APR compared to other options?
Convince the lender you’re a low-risk borrower
The secret stays in putting together well-researched and argued business loans proposals and provide detailed information about the financial history of your company. Your folder should contain:
- Your business plan, including your business goals and how you intend to repay your loans;
- Bank statements, tax returns and cash flow statements to prove your business income;
- A copy of your loan statements for the last 6 to 12 months;
- Proof that you have clean credit records.
Find the right time to apply for business loans
If you’re having troubles paying your loans, then refinancing might be a good idea. You only need to identify the best moment to apply for a loan, in order to make sure the refinancing will actually save you money and it will not bring in more debt. Here are a few factors that indicate it might be the right moment for a loan:
- You intend to reduce the loan repayment;
- You want to access equity;
- You want to consolidate your debts;
- Your planning on renewing your business equipment.
Be clever when borrowing
The lenders will always pay a high level of attention to any possible red flag. Be honest when submitting your request. Don’t try to mislead the lender. Here’s an insight: the moneylender will put a great deal of pressure on businesses that are looking to refinance an already existing debt. Therefore, it’s better to stay low key and don’t over borrow.
Be aware of the penalties
If it is your first time taking a loan, make sure you understand every single aspect of the agreement. Read everything written in the agreement document, from the very beginning until the end. Details can be critical when you try to get out of a really bad loan. Some creditors prefer to be paid on a monthly basis, as initially agreed, even if the borrower is able to reimburse the full amount in advance. In this situation, a fee is going to be imposed.
Keep in mind the tips mentioned in this article and you’ll be able to obtain your loan in no time. On a side note, if you are a business owner, and you are looking for an advantageous way of refinancing your business loans, contacting Business Loans could be an excellent option.