Everywhere businesses turn these days, they are inundated with information about how they can reduce expenses or save on costs as the country struggles through this recession. But one tip that often is missing is savings that can be had by refinancing business loans.
Everywhere businesses turn these days, they are inundated with information about how they can reduce expenses or save on costs as the country struggles through this recession.
Renegotiate with suppliers and vendors, strip your company down to its most basic operations, outsource or even layoff employees. These are a few of the many things that businesses are dealing with each day in order to survive.
All of this in the face of lenders reducing the availability of credit or even closing or reducing current loans and lines of credit.
To that note, there is another option that I would like to throw out there: Refinancing.
A lot of people only think about refinancing current loans when those current loans are in danger of default or if balloon payments are coming due. Many business owners just seem to forget about the loan as long as they keep making regular payments – it is kind of like thinking “if it ain’t broke …don’t fit it” – especially since it is such a pain to approach banks and other lenders and go through that whole loan process all over again.
The problem with this thinking is that you could be missing out on a great opportunity to save you company a tremendous amount of capital as well as positioning your small business for new growth opportunities that will emerge as the economy turns around. Plus, why not fix it now before it does break and no lender will be willing to help you!
Further, if you are fearful that your current lender is getting ready to pull the rug out under your feet, you can pre-empt that with a re-finance.
Proper financial management comes from always keeping an eye out for new opportunities. With this current, extremely low, rate environment and more financial companies looking for new customer growth – there is no better time to refinance your current business loans! This does not only mean refinancing your commercial mortgage loan or working capital term loan but also those loans and lease on your equipment.
Think about this (a simple example):
18 months ago, you took an equipment loan for $80,000 at 8% for 5 years. Today, you could refinance that same loan at 7% for the same 60 months and save nearly $500 per month. That is $500 per month that can go to meet other business expenses, take advantage of new growth opportunities, reduce debt-to-income levels for future loan requests, save employees jobs, etc, etc, etc.
While no single management decision will save your company in one shot, in combination all of these items (cutting costs, squeezing more out of current customers or and refinancing debt) will definitely lead to huge saving and new opportunities – now and into the future.