Want to refinance? Here is what you need to know.
Refinancing is sometimes a necessary evil. However, it is important for you as a business owner to understand and know why you are refinancing. Here are some questions to ask yourself to help you assess if you are a good candidate for refinancing.
- Your cash-flow is tight and your debt has been paid down at least 50% on some of your loans.
- You have several loans with several payment. Your credit is still good and you have available collateral.
- Your sales will support debt.
Finding a lender for refinancing is difficult. It is important to have honest, open conversations with your existing lenders to evaluate whether or not you are a good candidate for refinancing.
- Most non-traditional lenders are not allowed to be involved in refinancing your business. If you are short on collateral, or your credit history is rough, this may not be an option for you.
- Banks don’t necessarily like to be involved in refinancing, but will often refinance as a part of a new or larger project. An example would be if you are adding equipment, remodeling, or expanding the business and the ability to cash flow the business would depend on melding the additional debt in with the existing debt.
- Work with your existing network. Talk with your attorney, accountant, and lender to explore your options.
- Paying off debt is difficult and sometimes the worst thing to do is to extend that out further – the goal should always be to reach a point where your debt goes away so that you can move on to building and growing your business through additional financing.