The Complete Guide To Refinancing Your Business Loan

Not all business loans involve a short-term repayment term. Most of the business loans come with a long repayment term, and you feel like being stuck with them. Because business loans are expensive, it can be challenging to keep up with payments and ensure that you have enough money to hit the ground running. Cash is fuel for business. You will need an instant injection of cash in order to meet all business operations.

When you have taken on too much debt and you are struggling with payments, or it is affecting your business operations, you can think of refinancing your business debt. Most of the people are not aware of the fact that they can refinance business loans as well. However, there are certain conditions that you need to meet.

Business loan refinancing is a process of taking out a new loan in order to repay your existing business loans. In other words, it replaces your existing outstanding business debt with a new loan. It enables you to:

• Reduce the size of monthly payments
• And extend the repayment term

You can also say that refinancing consolidates your existing business debt into one large loan. You pay off your existing dues once and for all, and then you are left with only the recent loan. At the time of taking out start-up business loans in Ireland, most entrepreneurs fail to recognise whether they will be able to generate enough business to keep up with payments. Eventually, they find that actual profits are far less than projected profits.

Ways to finance a business loan

In order to apply for refinancing loans in Ireland, you should consider the following steps:

• Understand what you owe

In order to decide the amount of the refinancing loan, you will have to evaluate how much you owe. Note that it is not always possible that a lender would club all your business debts. In addition, they will carefully check your credit score and business income. In order to avail yourself of competitive interest rates, you must have a good credit rating.

If your business credit score is not up to snuff, there is still a possibility of getting money with the help of impressive revenues. Do not forget that your lender might charge early repayment fees. If so, despite that, you should be able to save enough money on interest payments when you refinance your business loan.

• Compare deals

The next step is not to grab the first offer. You should rather try options from other lenders. Make sure that you compare interest rates, annual rates, fees, and charges. The repayment term also plays a crucial role. Some lenders restrict longer repayment terms, while others are flexible.

You should choose a repayment term based on your business cash flow. So, you never struggle to keep up with payments again. While it is impossible to get to know actual rates and payments before you receive an official quote, online calculators can help you estimate the estimated payment size.

• Focus on the paperwork

You will need to submit all necessary documents to process the application. These documents include:

• A bank’s statement. Most lenders expect you to submit a statement of the previous 12 months, but some may accept up to six months.
• Financial statement. These include cash flow statements, profit and loss accounts, and balance sheets. You must be able to prove at least two years of trading.
• Details about your existing business loans, credit cards, and a line of credit. Lenders may ask for a reason for refinancing.
• Supporting evidence for your business profits. They include income tax returns and VAT. These documents let lenders gain insight into your financial condition.
• Personal details, the information about directors, their IDs, the company’s registration number, and related documents.

Once you have arranged all documents, you can save a lot of your time and energy.

• Apply for a new loan

Fill in the application form. Keep your documents ready so that you can submit them without further ado.

• Start making payments

You will discharge your debts by that amount, and then you will be responsible for making payments of the refinanced loan.

Upsides and downsides of refinancing a business loan

Here are the advantages and drawbacks of refinancing a business loan:

Pros	Cons
Refinancing will enable you to secure a loan at a lower interest rates.	Early repayment fees will be charged.
Since the size of monthly instalments will reduce, you can easily manage payments.	Missed and late payments will ruin your credit score.
You get rid of all your existing business debt and are left with only one recent loan to pay off.	The repayment term will be longer, so you will end up paying a lot more interest in total.
The repayment terms are flexible. They depend on your business income and expenses.	You might have to secure it against collateral and there is a risk of losing it if you fail to pay it off.

Things to consider before refinancing a business loan

Before refinancing a business loan, you should consider the following things:

• Your financial circumstances

Make sure that your business cash flow will not be disrupted. Your business should be able to meet all operational overheads.

• Credit score

Check your personal and business credit scores. Make sure that your score is good enough to avail yourself of lower interest rates.

• Early settlement fees

You will have to pay early settlement fees in order to discharge your business debt. Make sure that the fees do not add burden to your pocket.

Summing up

Business loans can be refinanced, but it is crucial to evaluate the impact of early settlement of your existing business debt. You will still need to have a good credit score to avail of refinanced loans at lower interest rates.