Signs You Might Want to Refinance Right Now

Loans are a common way for businesses to acquire capital, but some loans are more affordable than others. Our content partner Opportunity Fund breaks down how refinancing your loan can work when a small business is doing well or you're in need of more capital.

by Ashlyn Smith | Sep 28, 2017 | Finance |

You’re Not Making Profit

Two of the most common reasons small business owners refinance their loans is because they need additional working capital or because they want to lower their interest rate. Both of these reasons boil down to the issue of not making enough profit. Whether you are paying too much for an unaffordable loan or working to pay it off and needing more money, refinancing is a good option.

Keep in mind that interest rates might be higher because of updated pricing. If you now have better credit and a longer on-time payment history than when you first took out your loan, you might have the opportunity to qualify for a lower rate. This is when you should take advantage of the opportunity to pay less in the long term by refinancing.

You’re Stuck in a Debt Cycle

Merchant Cash Advances (MCAs) are dangerous and expensive ways to get fast cash. You can get the capital you need quickly, even with bad credit. The hidden costs are hidden fees, high interest rates, early payment penalties, and tricky terms that hide important information you need to know as a small business owner.

We are seeing more of our borrowers come in needing help paying off their debt cycles caused by MCAs and other predatory loans. While we try to help where we can, it’s important for you to really explore your options and demand to read the fine print before jumping on a fast, expensive loan.

That being said, refinancing your loan is one way to get out of bad loan situations. Different lenders have different terms for refinancing and consolidating debt, but having one line of credit instead of many looks better on your credit report and is less expensive in the long run. Opportunity Fund only offers refinancing if you need additional funds on top of your existing loan, but we are here to help your small business succeed in any way we can.

Holidays are Approaching, And You Need More Working Capital

Your needs as a small business owner are always changing, and often you need more working capital as holidays approach. During the summer, some of our borrowers request additional funds because they had extensions on their tax returns and now face larger bills than they expected. During autumn, we see borrowers start planning for the holiday season and need to hire more people, increase stock, and ramp up marketing efforts. Whatever the reason or season, refinancing is often an inexpensive way to get additional funding.

You’ve Come to This Blog Post

If you’ve come to IDEAL CDC & Opportunity Fund looking for information about refinancing your loan, then you’re already one step ahead. It means you are a proactive entrepreneur always looking for ways to increase profitability and decrease expenditures.

Opportunity Fund prefers borrowers who have paid off at least 70% of their existing loan – or in some cases at least 6-12 months of on-time payment. We can refinance your loan, increase the loan amount, update rates and loan terms, and only charge you a loan fee for the additional funds. You don’t need to pay a fee for the existing balance.

Think you’re ready to refinance your loan? Stop and take a moment to think if your business really needs additional financing. It’s important to only take out a loan if your business really needs it. Make sure you thoroughly understand your business’ finances and funding options before accumulating debt that could be unnecessary. If refinancing will increase your interest rate by 2% or more, we recommend keeping your existing loan and look for a second, inexpensive loan.