When to Consider Refinancing Your Business Loan

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Information
in
the
revenue-based
financing
articles
is
provided
for
general
information
only,
does
not
constitute
financial
advice,
and
does
not
necessarily
describe
Biz2Credit
commercial
financing
products.
In
fact,
information
in
the
revenue-based
financing
articles
often
covers
financial
products
that
Biz2Credit
does
not
currently
offer.

Many
small
businesses
take
out
a

business
loan
to
get
off
the
ground
or
help
spur
growth.
It’s
very
common
for
businesses
to
have
some
debt,
but
you
don’t
have
to
live
with
the
same
loan
terms
or
interest
rates
forever.
Refinancing
your
business
loan
can
help
you
adjust
the
terms
of
your
business
loan
to
get
a
lower
monthly
payment
and
increase
cash
flow
for
the
business.

But
when
is
the
right
time
to
refinance,
and
how
do
you
do
it?
We
break
down
some
of
the
best
times
to
refinance
a
business
loan
here.

What
is
Business
Loan
Refinancing?

First
off,
what
exactly
is

loan
refinancing?
Refinancing
a
loan
is
the
process
of
replacing
an
existing
loan
with
a
new
one,
typically
with
better
terms.
If
you’re
wondering,
can
you
refinance
a
business
loan,
you
can.
Many
business
owners
use
this
strategy
to
take
advantage
of
changes
in
the
market
or
in
their
business
situations.

Some
of
the
primary
reasons
business
owners
refinance
loans
include:

• Get
  a
  lower
  interest
  rate
• Adjust
  to
  a
  more
  favorable
  payment
  schedule
• Gain
  access
  to
  more
  funds
• Consolidate
  multiple
  loans
  into
  one

All
of
these
reasons
underscore
a
crucial
business
need:
Increasing
cash
flow.
When
you
refinance
a
business
term
loan
you’ll
typically
have
a
lower
monthly
payment,
which
frees
up
more
money
to
reinvest
in
the
business.

Typically,
you’ll
have
to
pay
a
refinance
and/or
origination
fee
to
refinance
a
business
loan.
Depending
on
your
lender
and
existing
loan
terms,
that
may
cost
a
few
thousand
dollars.
Nonetheless,
for
many
small
businesses,
it’s
well
worth
the
fee
to
lock
in
a
lower
interest
rate
or
consolidate
business
debt.
In
the
long
term,
a
new
bank
loan
may
wind
up
saving
you
thousands
in
interest
payments
while
keeping
those
savings
readily
available
to
reinvest
in
the
business.

It’s
important
to
note
that
refinancing
does
not
decrease
the
principal
amount
still
owed
on
the
loan;
it
only
changes
repayment
terms
or
increases
the
principal
by
combining
multiple
loans
for
your
small
business
into
one.

When
to
Refinance
a
Business
Loan

The
best
time
to
refinance
a

small
business
loan
is
when
your
company
is
performing
well
and
ready
to
grow.
If
your
business
is
performing
more
or
less
the
same
as
it
was
when
you
first
took
out
the
loan,
a
lender
is
less
likely
to
agree
to
refinance.
We
recognize
this
is
a
bit
broad,
so
let’s
highlight
some
good
times
to
consider
business
refinancing.

1.
Interest
rates
have
dropped

Especially
pertinent
for
small
business
owners
who
took
out
loans
in
high
rate
periods
between
2022
and
2024,
when
the
Federal
Reserve
lowers
the
federal
funds
rate
that
influences
all
loan
interest
rates
in
the
United
States,
it’s
worth
exploring
your
refinancing
options.
A
high
interest
rate
can
amount
to
thousands
of
dollars
every
month,
so
if
you
can
lower
that
rate,
it
may
result
in
significant
long-term
savings.

Interest
rates
are
out
of
your
control,
of
course,
but
they’re
important
to
keep
in
mind
if
you
have
a
high-interest
loan.
Business
loan
refinance
rates
may
be
better
now
than
they
were
when
you
initially
took
out
the
loan.
(Note
that
this
may
be
more
difficult
on
short-term
loans
than
long-term
ones.)
But
remember
that
refinance
business
loan
rates
can
also
vary
depending
on
your
business
performance
and
sometimes
may
actually
be
variable
or
floating
interest
rates
that
will
track
a
major
index
such
as
the
10-Year
Treasury
Yield.
Make
sure
you
understand
how
your
refinance
interest
rate
will
work
before
you
decide
to
complete
that
business
loan
refi.

2.
You
need
to
improve
cash
flow

Whether
it’s
due
to
a
current
interest
rate
that’s
too
high
or
a
short
repayment
period,
high
monthly
loan
payments
may
be
a
significant
drag
on
your
business.
If
you
find
those
monthly
payments
make
it
difficult
to
manage
your
budget
each
month,
it’s
worth
talking
to
your
lender
about
refinancing
your
business
loan.

Lenders
don’t
want
your
business
to
go
into
default
and
not
be
able
to
pay
back
the
loan.
Show
a
lender
your
books
to
help
them
understand
how
you’ve
used
the
loan
amount
in
the
first
place
and
how
cash
flows
through
your
business
currently.
If
you
can
illustrate
how
a
reduced
monthly
payment
will
help
free
up
cash
flow
to
invest
in
more
revenue-driving
activities,
like
marketing
initiatives
or
increasing
production
to
meet
high
demand,
a
lender
may
agree
to
extend
the
repayment
period
or
lower
the
interest
rate
to
help
you
free
up
cash.

3.
You’re
ready
to
expand
or
grow

Many
small
business
owners
take
out
loans
to
get
their
businesses
off
the
ground.
Since
new
businesses
can
demonstrate
very
little
financial
history
or
credit,
they
usually
have
less
favorable
terms
than
businesses
that
have
a
proven
record
of
making
on-time
payments.
As
such,
after
you’ve
honored
the
loan
terms
for
a
year
or
two
and
your
business
is
thriving,
you
may
be
able
to
refinance
into
better
terms.

As
we
just
mentioned,
lenders

want
your
business
to
succeed.
Successful
businesses
are
more
likely
to
come
back
and
borrow
again!

When
your
business
has
established
a
loyal
customer
base
and
demonstrated
a
year
or
two
of
sustained
growth,
it
may
be
time
to
expand
more
aggressively.
That’s
another
time
when
it
could
be
a
good
idea
to
look
at
refinancing
your
business
loan.

Lenders
will
review
your
financial
statements,
examine
your
profit-loss
calculations,
and
determine
that
steady
revenue
increases
justify
better
terms
on
your
business
loan.
Not
only
that,
but
if
you’re
looking
for
more
funds
to
grow
the
business,
you
may
be
able
to
refinance
an
existing
loan
into
a
new
one
with
a
higher
principal
and
better
terms.
That
way,
not
only
will
you
get
an
infusion
of
cash,
but
you
may
also
improve
your
interest
rate
or
extend
your
repayment
period.

4.
You
have
multiple
loans
that
could
benefit
from
debt
consolidation

Sometimes,
companies
may
take
out
different
types
of
business
loans
to
meet
goals.
If
your
food
truck
business
got
an
initial
loan
to
cover
startup
costs,
an
equipment
loan
to
buy
a
truck,
and
a
working
capital
loan
to
help
offset
operating
costs
like
gas
and
food
ingredients,
you’re
now
juggling
three
loans
with
a
different
repayment
schedule.
That
can
be
overwhelming
and
lead
to
accidentally
missing
payments,
which
can
affect
your
credit
score.

When
business
is
good,
it’s
easier
to
go
to
the
lender
and
ask
to
refinance
all
of
these
loans
into
a
single,
new
loan.
The
combined
principals
will
go
into
a
single
loan
with
a
single
interest
rate
and
a
single
repayment
plan.
That
will
not
only
reduce
the
logistical
burden
of
repaying
your
business
debts,
but
you
may
save
on
interest
in
the
long
run.

5.
Your
credit
score
has
substantially
improved

One
of
the
primary
factors
lenders
use
to
determine
business

loan
interest
rates
is
your
personal
and,
if
applicable,

business
credit
score.
When
you
borrowed
the
money
initially,
you
may
have
had
a
less-than-stellar
personal
credit
score.
However,
if
you’ve
paid
back
the
loan
on
time
and
stayed
on
top
of
your
personal
debts,
like
credit
card
payments
and
a
car
loan,
you
very
well
may
have
seen
an
increase
in
your
credit
score.

A
substantial
score
improvement
of
10
or
more
points,
combined
with
solid
financial
reports
from
the
business,
may
make
you
eligible
for
a
lower
interest
rate.
You
don’t
always
have
to
settle
for
your
initial
interest
rate.
Refinancing
your
business
loan
once
you
have
a
better
credit
score
could
save
you
big
money
in
interest
payments.

How
to
Refinance
Business
Loans

If
you’re
getting
ready
to
pursue
a
small
business
refinance
loan,
the
process
is
quite
similar
to
getting
the
initial
loan.
That’s
because
most
loans
for
small
businesses
follow
a
similar
process.
But
if
you
need
a
refresher,
here’s
how
to
go
about
it
when
you
think
it
may
be
time
to
refi
your
business
loan.

1.
Determine
how
much
you
owe

With
a
single
loan,
it’s
simple
enough
to
find
the
principal
loan
amount
you
still
owe.
With
a
few
different
loans,
you
might
have
to
do
a
little
math
to
figure
out
the
total
debt.
When
you
know
how
much
you
owe,
reach
out
to
your
lender
to
make
sure
you
fully
understand
your
loan
terms
and
ask
about
any
loan
options
or
products
that
you
may
be
eligible
for
now
that
you
weren’t
eligible
before.
For
instance,
many
U.S.
Small
Business
Administration
(SBA)
loans
require
businesses
to
be
operational
for
at
least
two
years
before
applying.

In
addition
to
asking
about
offers,
clarify
with
your
lender
if
there
are
any
prepayment
penalties
if
you
were
to
pay
the
loan
off
ahead
of
maturation,
and
a
payoff
quote.
The
payoff
quote
shows
the
total
amount
needed
to
pay
off
your
original
loans,
including
any
interest
accrued
between
now
and
the
date
you
pay
off
the
loan.
With
that
number,
you’ll
have
an
idea
of
whether
it’s
better
to
pursue
debt
refinancing
or
to
stretch
now
to
pay
off
your
debts
entirely.

2.
Determine
a
refinancing
goal

What
do
you
actually
want
from
a
business
loan
refinance?
Different
businesses
have
different
needs.
Your
business
may
want
lower
monthly
payments,
which
may
mean
a
lower
interest
rate
or
a
longer
repayment
term.
Your
business
may
have
more
liquidity
than
expected
and
want
to
shorten
the
repayment
term
to
settle
the
debt
faster.

Remember,
even
if
you
extend
your
repayment
term
and
lower
the
interest
rate,
you’re
paying
interest
for
longer.
Even
with
a
lower
monthly
payment,
you
may
wind
up
paying

more
in
the
long
term
if
you
refinance
into
a
longer
repayment
period.

Before
opening
up
business
loan
refinancing
conversations
with
the
lender,
run
through
a
few
scenarios
with
an
accountant
or
other
trusted
business
advisor
to
figure
out
what
the
best
(realistic)
outcome
would
be
for
your
business.

3.
Review
eligibility

How
has
your
business’s
financial
profile
changed
since
you
applied
for
the
initial
loan?
To
review,
the
most
important
qualifying
factors
lenders
look
at
when
approving
a
loan
include:

• Personal
  credit
  score
• Business
  credit
  score
• Time
  in
  business
• Annual
  revenue
• Available
  collateral
  (if
  applying
  for
  a
  secured
  loan)

If
all
of
these
numbers
have
improved
since
your
initial
application,
you’re
in
good
shape
to
refinance
or
get
a
new
loan.
You
don’t
have
to
settle
for
a
bad
credit
business
loan.

4.
Compare
loan
products

While
it’s
often
easy
to
refinance
with
your
current
lender,
you
may
also
opt
to
get
a
new
loan.
Most
traditional
or
SBA
loans
allow
you
to
use
funds
to
pay
off
other
debt.
In
certain
cases,
rather
than
refinancing,
it
may
be
better
to
get
a
new
loan
with
more
favorable
terms
to
pay
off
the
existing
debt
and
use
the
remaining
lump
sum
to
fund
the
business.
When
you
pay
off
the
first
loan,
it
will
help
your
business’s
credit
score
and
potentially
put
some
more
money
into
your
business
while
taking
out
a
new
business
loan
with
better
terms.

Once
your
business
has
been
profitable
for
a
while,
it’s
likely
a
better
applicant
and
will
have
more
options
between
traditional
lenders
like
banks
or
credit
unions,
SBA
lenders,
and
online
financing
providers
like
Biz2Credit.

5.
Gather
documents
and
apply

What
you
need
to
refinance
your
loan
will
depend
on
the
lender,
but
usually,
the
application
process
should
be
fairly
straightforward.
Your
lender
already
has
much
of
the
general
information,
like
the
business
license,
business
plan,
and
employee
identification
number
(EIN),
so
it
will
just
need
updated
financial
reports.

If
your
business
is
in
a
slow
time,
it’s
a
good
idea
to
wait
until
you
have
some
more
positive
recent
numbers
to
report.
The
lender
will
want
to
see
monthly
balance
sheets,
revenue
reports,
and
personal
and
business
bank
statements
to
understand
the
business’s
(and
the
business
owner’s)
financial
health.
Likewise,
you’ll
also
need
your
personal
and
business
tax
returns,
any
additional
current
loan
statements,
and
information
on
collateral
if
you’re
applying
for
additional
secured
business
financing.

Conclusion

Higher
costs
of
capital
can
make
life
hard
on
a
small
business.
That’s
why
knowing
when
it’s
the
right
time
to
look
at
refinancing
your
business
loan
is
important!

If
your
business
has
thrived
despite
higher
interest
rates
or
demanding
loan
repayment
terms,
it
may
be
in
your
best
interest
to
refinance
a
business
loan.
With
more
time
in
business,
a
stronger
financial
history,
and
improved
credit
scores,
your
business
will
likely
be
a
stronger
loan
applicant.
When
you’re
ready
to
invest
in
the
business’s
growth
and
need
to
increase
cash
flow
and
working
capital,
it’s
time
to
explore
business
loan
refinance
rates
and
consider
refinancing
your
loans.

FAQs

What
is
refinancing
a
loan?

Refinancing
a
loan
is
when
you
replace
an
existing
loan
with
a
new
one,
typically
with
better
terms
for
the
borrower.

What
does
it
mean
to
refinance
a
business
loan?

Refinancing
a
business
loan
is
when
a
business
reaches
an
agreement
with
its
lender
to
replace
an
existing
loan
with
a
new
one.
Usually,
in
exchange
for
a
refinance
fee,
a
business
will
get
a
lower
interest
rate
or
an
adjusted
payment
schedule
that
will
allow
it
to
increase
cash
flow
in
the
business.

Can
you
refinance
a
business
loan?

Yes,
you
can
typically
refinance
any

term
loan,
although
different
lenders
may
have
stipulations
as
to

when
you
can
refinance.
Usually,
you
can
only
refinance
after
you’ve
made
a
certain
number
of
payments.

Can
you
refinance
an
SBA
loan?

Typically,
you

cannot
refinance
an
SBA
loan.
However,
there
are
some
special
circumstances.
For
example,
if
a
borrower
cannot
get
approved
for
an
additional
non-SBA
loan
without
an
SBA
guarantee,
the
SBA
may
agree
to
permit
a
refinance
of
a
current
loan
to
guarantee
the
borrower’s
new
financing.

What
is
your
credit
score?

A
credit
score
is
a
number
between
300
and
850
that
predicts
how
likely
you
are
to
pay
back
a
loan
on
time.
It’s
developed
by
credit
reports
that
weigh
several
factors,
including
your
credit
and
debt
history,
to
help
lenders
decide
whether
or
not
to
approve
you
for
a
loan
and
what
terms
to
offer.

Small
businesses
may
also
have
a
FICO
Small
Business
Scoring
Service
(SBSS)
score
ranging
between
0
and
300.

What
are
the
requirements
for
refinancing
a
business
loan?

Every
lender
has
different
refinancing
requirements.
Typically,
lenders
consider
the
remaining
loan
principal,
the
number
of
payments
on
the
loan
you’ve
already
made,
as
well
as
financial
information
like
credit
scores
and
monthly
or
annual
revenue.

Frequent
searches
leading
to
this
page

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business
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business
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rates,
unsecured
business
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a
business
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Interest
rates
for
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