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Refinance a Business

refinance a business texas

Refinance a Business

When your business needs access to capital quickly, you might consider refinancing your business. Carefully weighing all pros and cons will ensure the most favorable decision for the continued financial health and vitality of your business. Let’s look into the potential benefits to determine whether to refinance a business loan.

Why should I refinance a business?

Lower interest payments

Macro and micro economics play a key role in determining if refinancing is right for your business. Certain market factors such as interest rates and economic trends can make financing more favorable at times. Take for example the COVID-19 pandemic. Interest rates were at an all time low (3.25%) making it a good time to refinance your existing debt. Another factor to be aware of is the terms of your current loan(s). If you took out a loan to start or grow your business, chances are the interest rate was not favorable due to the high risk put on the lender. However, if the business has been operating successfully then it would be a good time to refinance the loan and improve the interest payments. This is due to the established sustainability you have created with your business.

Improve loan terms

Other components of a business loan include the length of the loan term and if there are any collateralized assets. Most of the time, traditional financing and SBA lenders will look at the assets that can be used as collateral in the event a borrower defaults on payments. Similar to interest rates, the riskier the loan, the more collateral the lender will take. Therefore, refinancing can help you take some of that collateral back.

Decrease business risk

Lowing debt service payments reduces the overall business risk. This takes stress off the business owner as it creates more room for cash flow. Additionally, if a business owner is trying to raise additional capital to grow or is entertaining the idea of selling soon, lower the debt service creates a more appealing investment to buyers.

Access to working capital

Refinancing can free up additional cash that can be used to grow your business. Having more profitability as a business owner gives you the resources to accomplish the goals you’ve laid out for the company.

What is a corporate refinance?

Corporate refinancing is a process through which a company can reorganize its financial obligations by replacing or restructuring existing debts. Some of the goals of corporate refinancing are to reduce monthly interest payments, find more favorable loan terms, reduce risk and gain access to more cash.

How do I refinance a business?

Going to a local bank can be the easiest way to get a corporate refinance. Sometimes you can use the same bank, if you have an existing loan, and renegotiate a new term sheet. A bank or lender will require a lot of information such as business financials, debt schedule, asset list, personal financial statement, management resume and also make you fill out a huge pile of paperwork. Then the bank will review this information to determine how much strength the borrower and the business have to service the debt.

Although this process can be done yourself, it is rigorous and very time-consuming. Some experienced business brokers and M&A advisors, such as Investment Business Brokers, offer services to help you secure a refinance allowing you to focus your time on growing the business. hile IBB is headquartered in Dallas, we serve clients nationwide. If you have any other questions or would like to learn more about our business brokerage services, call us at 972-266-4525 or fill out our contact form online and we are happy to share our knowledge with you. If you have any other questions about corporate refinances or are considering refinancing your business, contact us and we are happy to share our knowledge with you.