When the going gets tough, a business loan can provide you with the necessary funds to keep your venture going. You can use the borrowed money to cover a wide range of expenditures and help your business flourish.
But what happens if you are not happy with the repayment terms and the interest rate associated with your loan? The solution to all your woes is refinancing! Keep reading to learn how to refinance your loan and achieve more favourable terms.
How can you refinance a loan for your small business?
Refinancing your loan allows you to reduce the overall cost of your loan by paying it off with a new loan. Simply put, you can transfer your existing loan to a new lender that can offer you better repayment terms and lower business loan interest rates.
However, while looking for a new lender to refinance your loan, you can also look for extra benefits to make the repayment process smoother and less burdening.
By refinancing your loan, you can:
- Go for a longer or shorter tenure
- Lower the business loan interest rates
- Reduce the monthly EMIs
- Improve your credit score
- Increase the working capital
How to refinance an existing business loan
Consider your finances
As a business owner, you must have a clear idea of your finances and your business’s financial health before you refinance the loan. To do this, check your credit score, net worth, balance sheets, and other relevant documents. You must also calculate the amount you owe and the time left in the current loan term. This will help you pick the ideal lender and loan terms for refinancing.
Decide your refinancing goal
The next step in refinancing smallbusiness loan is to have a defined set of goals. Why do you wish to refinance your current loan, and what are your aspirations from the second loan? Some common goals include reducing the monthly EMIs, increasing the capital, or changing the tenure to make the repayment more manageable.
Research and compare lenders
Remember, it is crucial to explore all your options before settling on one. Thus, it is recommended you research thoroughly to pick the right lender. Some of the factors you must consider are business loan eligibility, interest rates, repayment options, any hidden charges or penalties, and extra benefits.
Apply for refinancing
Now that you have chosen a lender and have found the right loan to refinance your loan, it is time to apply. Compile all the paperwork required for the application process, such as your identity proof, bank statements, tax returns, profit and loss statements, balance sheets, business proof, etc. Next, apply for the loan online or offline as per your lender’s policies and wait for approval.
Additional Read: Top Small Business Trends for 2021
The bottom line
Loan refinancing can be a wise move for your small business if you can get better interest rates and loan repayment terms on the new loan. So, if you’re ready to take the next step, visit Tata Capital’s website and peruse through our business finance offerings today.