5 Things to Consider Before Refinancing Business Debt or a Cash Advance
Refinancing your business debt could lower your monthly payments by using ARF Financial.
Depending on how your cash flow and business needs have changed since you took out your initial loan, refinancing could be the best choice to help pay down your debt and free up cash flow. Consider the logistics involved to determine if refinancing is right for you.
1. Check for Penalties
Some loans carry prepayment penalties that decrease over the life of the loan. The loan involved in the refinancing process may also carry one of these fees. That means you could wind up paying quite a bit extra if the loan you’re looking to refinance is relatively new.
Find out how much the current penalty is and how much it could potentially decrease in the near future. It may be better to wait to refinance until the rate decreases to a manageable level.
2. Ask About Fees
In addition to penalties, you may face fees from appraisers, attorneys and one or more lenders when refinancing your business debt.
Any individual or group involved in the process will charge some kind of extra fee, and you need to be aware of what all these other payments amount to. Figure out the total before starting the refinancing process so that you can budget for the added expenses.
3. Scope Out Interest Rates
Refinancing may not be beneficial if your current loan has a very low interest rate. However, if you’ve been paying down a loan with very high rates, you could have a good chance to save quite a bit of money.
Improving your credit score and establishing a more reliable revenue stream may both qualify you for better loan terms. We offer business loans with fixed rates and terms to get away from dealing with the unpredictability of unpredictable payments.
4. Choose the Best Payment Structure
The amortization rate of a loan refers to the time period you have to pay it off. Refinancing with a loan that gives you a longer time to pay means less impact on your cash flow each month. Compare payment structures to your current cash flow and profit projections to determine the level of payment you can handle every month.
5. Check Transfer-ability
Before taking a longer-term loan, considered the possibility that you may sell your business before the terms are up. If that happens, you must be able to transfer the loan to the buyer or be ready to pay it off. Some buyers are unwilling or unable to take on outstanding debt, meaning that a loan could be a liability. Take this into account when assessing the amortization rate of the loan you’re looking into.
If you discover that refinancing could solve your business debt problems and improve your cash flow, these steps will guide you in finding the best loan to meet your specific needs.
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