When it comes to developing your business, financing can be an invaluable way to increase your accelerate your growth through access to additional working capital, giving you the freedom to grow and take advantage of opportunities when needed. Refinancing and managing your balance sheet is a way to further enhance your liquidity and is a vital practice for many companies. Negotiating your current financial terms to either increase payments in order to reduce your borrowing time, or extending the length of your term in exchange for lower monthly payments both have unique benefits for business owners. Learn more about refinancing, as well as what to consider before going ahead with any changes to your lending and balance sheet structure below.

What is Refinancing?

Simply put, refinancing involves modifying your existing lease or loan structure to a new one that could include features such as a revised interest rate (typically lower), and repayment period (typically longer). In some instances, a higher rate may be favourable if that means freeing up collateral or other changes such as removing guarantees or reporting requirements. Refinancing can also provide a way of resetting your “amortization clock”, and can often give businesses the access they need to important assets that would otherwise be tied up in the original financing structure. Business owners often decide to pursue refinancing in order to take advantage of a more favourable interest rates, to consolidate other debts into a singular lease or loan, or increase their liquid assets going forward.

Benefits

When structured correctly, the refinancing process has numerous benefits to offer owners. Advantages include:

The ability to significantly reduce your interest rates

Restructuring your loan often makes it possible to reduce your monthly payments, which gives the immediate benefit of having more cash on hand for your daily operations. If you’re in need of new equipment, looking to expand your office space, hire additional staff, invest or expand a sales and marketing program or would benefit from having more cash readily available to cover overhead or payroll, then lower interest rates and payments can be an attractive option to achieve these objectives.

Puts goals into perspective

Businesses often seek to refinance their loans in the event of a new goal, milestone, or upcoming major project on the horizon. These kinds of situations can make minimizing monthly payments ideal, if not necessary, meaning that refinancing your current loan structure is advantageous.

What to Consider

If you are considering refinancing your loan to meet your financial goals, there are a few variables you’ll want to consider prior to applying. These include:

Existing business loan rates

If your current rate is lower then the proposed refinancing rate, it may be time to look for another financing partner for a more favourable option. If the proposed rate is lower, however, refinancing may be a perfect fit.

Equity

Having built up equity in your business (such as in major assets as large equipment) will help ensure you are in the best position prior to pursuing refinancing. Strong equity typically aids in achieving a lower interest rate.

Credit Score

Your credit score plays an important role in determining your eligibility for favourable loan rates, as well as your ability to qualify for refinancing. The better your repayment history, the lower the rate you will need to pay. It pays to have a consistent repayment history with other vendors or lenders.

Relationship with your lender

Establishing a clear relationship with your financing partner will help keep communication smooth throughout the financing process and assist you in navigating cash flow problems down the road. As a lender that was founded by entrepreneurs, for entrepreneurs, Current Financial understands the unique needs faced by business owners across multiple industries. Our team of financial experts work closely with clients to determine financing structures for clients, many of whom are repeat clients. We are dedicated to providing innovative financing solutions that help facilitate the start, growth, and future success of your business and can be there to offer the proverbial umbrella when it starts to rain.

Looking to refinance your loan or inquire about acquiring working capital? Contact our team today to learn more!