Refinance A Business Loan

If you think your bank/lender is giving you a hard ride with your current existing rates, you should consider choosing to refinance your business loan.

Fortunately, you’re in the right place. Here, we’ll break down everything you need to know about refinancing a business loan and why it always helps to seek a reliable mortgage broker.

How complicated is refinancing a business loan?

In simple terms, refinancing your business loan means applying for a fresh mortgage loan all over again. Most of the time, it means paying off an existing loan with a new one.

You can also choose to merge your current debts at a lower cost by refinancing your business loan.

Since business loans are outside the scope and regulations set by the National Consumer Credit Protection (NCCP) act, banks and lenders are typically more lenient and flexible with their rates and policies.

Nevertheless, convincing the bank that you’re a trustworthy client and a low-risk borrower is just as crucial. That said, you need to provide adequate proof and documentation of your business’s sales history and financial standing.

You don’t need to worry as much if your business has a relatively strong foundation and grip on the market. The following are some of the required proof most banks and lenders would ask from you:

• Business’s proof of income: This includes two to three years’ worth of bank statements as well as projected cash flow and tax return statements.
• A solid business plan: Do your research well and highlight your business goals as well as how you’ll meet your due payments.
• Prepare copies of your business loan statements for the previous year (or six months).
• A business credit file with zero bad records and an owner with a high credit score.

When should I consider refinancing my business loan?

We recommend reading through the following list of things to consider so you can better decide whether you need to refinance your business loan or not:

• If you want to renovate your business property or invest in new equipment
• If your business loan is no longer helping your financial situation
• If you want to minimise your monthly mortgage payments
• If you need to gain access to your business equity
• If you’re looking into debt consolidation
• If you’re already past your fixed-rate term
• If you want your business to thrive long enough to recover from the refinancing expenses

How will I refinance my business loan?

Before going out of your way to finding a business loan refinancing deal, here are five steps you need to know in applying for a new loan:

Decide if you really need to refinance

You can always choose to refinance your business loan. However, take the time to think about whether you need to refinance or not. It may not be an excellent decision, especially if you’re paying off a fixed loan rate.

Besides, if you haven’t read the exit policy of your existing loan, you may end up paying expensive exit fees on your business loan.

Look for the ideal bank and loan deal

If you have time, consider shopping through different lenders and mortgage deals to choose the best lender with the features and rates you need.

Otherwise, our mortgage brokers at Plan A Mortgage can streamline the process for you so you can save a lot of your precious time and focus on growing your business.

Apply for a new mortgage

Once you’ve decided on a bank and loan deal, it’s time to prepare all the required paperwork and apply for the loan. We recommend giving your current lender a heads-up so your new bank or lender can acquire your information faster.

Get your loan request approved

Once the bank finishes evaluating your loan application and information, you’ll eventually get formal approval if the lender chooses to accept your loan application. After that, you’ll be well on your way to refinancing your business loan.

Business loan settlement

After getting formal approval, your new business loan will now begin paying off the old one. Most of the time, you have a month to settle the old loan and start your repayments for the new business loan.

For your business loan refinancing, we have specialist mortgage brokers to help you shop and find the best lender and rates and get your loan approved in no time.

We’ll be happy to discuss your business loan needs with you. Call us at 1300 052 055 today.

What are the benefits of refinancing a business loan?

Despite the risks associated with paying off a business loan with another one, there are still a handful of benefits a business can reap from refinancing an existing loan, such as:

Enjoy more competitive rates

If you think you’re paying more on your current loan, it’s not a bad idea to refinance your loan with a better deal that will save you more in the long run.

Consolidate your debt facilities

You can merge five debt facilities into one business loan and only have to meet one monthly payment. By doing so, you don’t have to deal with several monthly payments from different banks.

Access your business equity

By refinancing your business loan, you can take off the liability from your equity. That means you can use your business equity as another working capital or use it for investments.

Enjoy more loan features

Having a business loan long enough will give you access to new features, especially when you refinance your loan. These features, including extra repayments and opening an offset account, can help you repay the loan faster in the long term.

Tax benefits

You can enjoy depreciation benefits and leverage negative gearing by refinancing your existing business loan. However, we always recommend speaking with a taxation professional before proceeding to refinance your loan.

Some things to consider before refinancing your business loan

Considering all factors before refinancing your business loan is crucial to prevent any regrets along the way.

If you already understand how refinancing affects your brand and your funding in the long run, then we suggest going for it. Here are some of the considerations you need to weigh before refinancing:

Business goals

Whether you refinance your business loan or not will depend on your ultimate goals for your business. You can always refinance if you’re looking for better interest rates, access to more loan features, or switch to another loan.

Timing

Refinancing on a fixed rate could lead to an expensive exit fee when you want to switch lenders. However, if your business loan is on a variable rate, we recommend refinancing your business loan every two to three years only if you think you’re better off afterwards.

Transaction charges and associated fees

Refinancing a business loan involves a few associated fees, including the exit fee, valuation fee, and settlement fee.

Choosing the perfect lender and loan product

It doesn’t hurt to shop around and look for the ideal lender for your desired loan product. Not all banks and lenders can offer you the deal and rate that you need. That’s why having a mortgage broker as your partner can help you find the right bank/lender for your business.

Credit file enquires

Every time you apply for a business loan refinancing, you’re adding an enquiry to your credit file. Over time, enquiries stack up if you don’t get formal approval. As a result, this could harm your credit score, and you might have trouble getting approval for different financing products.

We recommend discussing with a tax professional or financial advisor before heading out to refinance your current business loan.