When we take a loan, we accept a few fees and options that were available at the time. We agree on a certain repayment plan, and we also accept that there’s a certain interest rate that comes with the deal. After all, we need to get the business going so we can’t be picky about it.

After a while, we see that our business is going well – but we still have to pay a lot of money to cover the loan that we got in the beginning. That’s when we see that new, shiny loan with better interest rates and a more attractive repayment plan. Basically, refinancing is the process of taking out a new loan in order to pay off the previous one. You’ll still be paying the same amount that you owe, but you’ll reap different benefits.

If you are not sure whether you need to refinance your small business loan or not, here are five signs that flat-out say you definitely need to go for it.

  1. Mainly all your payments are still going on interest

When considering small business loan refinancing, think about how much interest you have left on the first loan. Depending on the loan, the borrower will spend whole months paying off the interest before starting on the principal (as in, the actual amount that you get from the loan).

If you no longer have to pay the interest and only have the principal to focus on, then a refinance is not really necessary. On the other hand, if you are still paying for the interest – and it doesn’t seem to be going away anytime soon – then you might want to consider this opportunity to minimise the debt.

  1. You’re in for the long haul

Refinancing can be a good way to improve your company’s cash flow – especially when you’re in it for the long haul. The more time you have to invest in a loan, the more you will have to pay on interest and other fees.

Keep in mind, however, that refinancing a business loan also comes with a lot of fees, such as appraisal and closing costs. NSW Mortgage Corp offers fairly attractive fees in these circumstances, so they might be a good option for you if you are looking to refinance.

Still, if you don’t plan to own a business long enough to recover that money you spent on fees, then you might want to reconsider refinancing. You should only do it if you are determined to take your company for the long haul.

  1. Your credit has improved

The better your credit, the more chances you will have of getting a lower interest rate. Let’s say that your credit was not in its best condition when you took the loan – which is why your interest rate was also average. But if your business credit went up, then you might just nail a better interest rate on your loan – which means you will pay less money in the long run.

You can improve your credit by paying your bills and instalments on time. The more they will see you are true to your words and don’t tend to make people wait for money, the less inclined they will be to overcharge you in interest. You may also go for credit repair companies since they can find any irregularities that may be bringing down your credit.

  1. You qualify for refinancing

If you’re qualified to do it, why not go for it? The reason you even considered refinancing in the first place was that you were attracted by the new rates – so if you have the opportunity, you should just grab the chance.

Different companies offer different options – so make sure you do some research before settling on a company. Choose the ones that offer the best interest rates and best fees possible – and then contact them with your request to refinance your loan.

  1. Your lender is using predatory tactics

Basically, when you see that your lender is trying to skin you alive of money, you might want to go for refinancing with a different creditor. Generally, a company should not charge exceptionally high interest rates, nor should they charge fees that go over 1% of your loan – so if you feel like that is the case, then you might want to try doing the swap.

Final Thoughts on Refinancing

If one – or even more – of those facts seem to apply to you, then you might want to go for refinancing your small business loan. However, you may want to consider all the options before going for the change. You may want to check with your creditor or your financial advisor. They will generally give you all the information that you need in order to make the correct decision.