Is It Time to Consider Business Debt Refinancing?

Is It Time to Consider Business Debt Refinancing?

Business debt refinancing allows businesses to pay off multiple current high interest debt obligations by consolidating them into a single lower interest debt instrument. When a business has accumulated multiple debt obligations with less than advantageous terms, consolidating them into one loan can help the business increase cash flow and save money. You Might Want to Consider Debt Refinancing If..

Your Business Could Use a Reputation Boost

It can help your business reputation to have as little debt and as few creditors as possible. Refinancing multiple debt obligations under a single loan can be a step in the right direction, especially if your business was under threat of litigation due to non-payment of debt. Even if circumstances have not grown so dire, refinancing reduces the number of accounts and creditors a business is juggling and makes it easier to manage monthly payments.

You Need a Longer Term for More Cash on Hand 

If current debt obligations are short term, refinancing to a longer term debt instrument can stretch payments out over a longer period, which makes each payment smaller. This means that the business has more cash on hand and a greater monthly cash flow. Cash flow is important for purchasing supplies and equipment, as well as ensuring employees will be paid on time.

It Allows You to Save You Money

Debt refinancing is only helpful if it saves a business money. Therefore it is important to understand the full scope of loan terms when comparing refinancing options. The terms of a loan — the interest rate and the amount of time you have to repay it — will depend on several factors. These factors include the size of the loan, the value of the collateral you can offer to secure the loan, and the amount of risk of default that the lender is willing to accept. That is, if the lender perceives your business to be a high risk for non-payment, your repayment period may be shorter and your interest rate may be higher.

There is a Clear Picture of Any Fees Associated

Loans can include other fees besides interest, such as service fees and repayment penalties. It is essential to have a clear picture of the sum total cost of the loan in order to effectively compare it with your current situation as well as all debt refinancing options under consideration. If all the fees and penalties offset the money being saved by a longer repayment period and lower interest rate, then refinancing is not helpful.

You Operate Within a Set Budget

If your business has a history of operating within a set budget and has a positive outlook for the future, it is possible you have simply accumulated multiple debt obligations. In this case, debt refinancing could be a smart move to get your business back on track and preserve your good credit and reputation.



To request debt refinancing, please contact us at Financial Capital Solutions today!