Many times small business owners will be faced with the issue of paying back a commercial loan that ties up all of their assets and hurts their cash flow, explains Carlos Hank Rhon. If this is the case with your company at the moment, then you may want to consider re-financing your commercial loan. After looking over your company’s financing and evaluating all of the opportunities in front of you, many times refinancing a commercial loan may seem like the only option that is available to you. And it could be one of the best decisions that you can make as a company owner. By refinancing your loan you may be able to save a lot of money with a lower interest rate and be able to pay back your loan in a shorter amount of time which will help to improve your company’s profits and cash flow over time.
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The first thing you need to do if you are considering refinancing your commercial loan is to look at all of your existing debt and see if there is anything you would be able to get rid of, explains Carlos Hank Rhon. The length of your new loan should collaborate with the same amount of time that your collateral will be able to hold its current value. Therefore you will want to use all of your assets such as accounts receivable or any inventory that you have to help secure your new short term loan. However more durable assets like real estate or large equipment can be used to help secure long term loans instead.
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There are a few questions that you may want to ask yourself before you begin to refinance your commercial loan. You will want to know what the prepayment penalty is for refinancing your current debt. It is also important that you believe that the loan terms sound reasonable enough for your company to go by. You will need to check to see how much time is left on your amortization schedule and figure up what the interest rate is for your current loan so that you know that you will be getting a good deal. Be aware that if you are refinancing any type of real estate, your savings could be destroyed by new title work or appraisals plus any origination fees or other closing costs that may come up. If the term of the amortization is lengthened along with a new lower interest rate then your business will be able to see some cash flow relief after all.
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It is best to talk with a lender at your current financial institution first when you are considering having your loan refinanced, notes Carlos Hank Rhon. They already know you and understand where your company is at and what your needs are. Plus they are already holding all of your assets in collateral so this would make refinancing your commercial loan not only easier but less time consuming and more cost effective in the long run. No matter where you decide to refinance your loan, it is important to have a good, solid business plan so that you will be able to fully demonstrate the strength of your company and prove that you have what it takes to take your business to the next level of success.
Content Source: Carlos Hank Rhon : Re-Financing your Commercial Loan
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