A Guide to Business Loan Refinancing
Yes, you can refinance your business loan to improve your financial situation. Whether you're looking to reduce interest rates, consolidate debt, or free up cash flow, refinancing offers several benefits. This guide will walk you through the reasons to refinance, what to consider, and how to evaluate if it's right for your business.
Refinancing can bring several advantages, including:
However, you should be careful not to take on too much risk. Eligibility criteria for refinancing varies by lender, but you'll typically need to meet certain requirements, such as having a minimum trading history or a certain turnover.
You also need to look out for expensive early settlement charges on your current agreement which could wipe out any saving you make securing lower interest rates.
This Business Loan Calculator will help you work out how much interest you will be paying over the term of the contract. Most Non-regulated lenders charge a large percentage of the total interest to settle early.
When Is Refinancing the Right Choice for My Business?Refinancing your business loan isn't always the right financial strategy. Consider business loan refinancing if:
To explore refinancing for your business? Success starts with a compelling loan proposal. Learn ‘how to create a winning business finance application’ in our comprehensive guide.
🔎 This resource will walk you through:
Eligibility Criteria for Refinancing a Business Loan:Before pursuing business loan refinance, lenders will evaluate your company against specific criteria.
Here's what you need to know about qualifying for a business refinance:
Expert Tip: Successful refinancing applications often exceed minimum requirements across multiple criteria, strengthening your negotiating position for better terms.
Ready to explore your business refinancing options? Understanding these eligibility criteria is your first step toward securing better loan terms and unlocking capital for growth.
How to Refinance Your Business Loan - A Step-by-Step Guide:Follow these essential steps to secure better business loan terms through refinancing:
Ready to start your business refinancing? Contact James Murray Finance for expert guidance on securing the right refinancing solution for your business growth needs.
Pro Tip: Many UK businesses qualify for the Growth Guarantee Scheme, potentially offering better refinancing terms and reduced security requirements.
If you’d like to learn more about the Growth Guarantee Scheme you can read more about the successor to the Recovery Loan Scheme on the British Business Bank Website. Alternatively, you can watch our quick video below, Or read our Government Guarantee Growth Scheme Article which goes into more detail.
The Risks of Refinancing Your Business LoanWhile refinancing can provide numerous benefits, it’s important to understand the potential risks before moving forward. Here are some key risks to consider:
Early Repayment Penalties ⛔
If your current loan has an early repayment clause, you may have to pay a fee for settling the loan early. These penalties can sometimes offset the benefits of refinancing, so check your existing loan terms carefully. If you have a regulated finance agreement, you can use this Finance Settlement Calculator.
Increased Total Repayment 💷
Refinancing often allows you to extend the loan term, which can reduce your monthly payments. However, this could lead to paying more in interest over the life of the loan, even if the interest rate is lower. Always calculate the total cost of the loan to ensure that the overall savings are worth it.
Potentially Increased Debt Liability ⚖️
When refinancing, there’s a temptation to borrow more, especially if your business is doing well or if lenders offer you a higher loan limit. While this can help with immediate cash flow or expansion plans, it increases your overall debt liability. You must ensure that your business can handle the additional repayments without negatively affecting long-term financial stability.
Unforeseen Costs ⚠️
Aside from early repayment fees, you might encounter other costs during refinancing, such as application fees, legal fees, or appraisal costs. Make sure to account for these when determining whether refinancing is cost-effective.
If you're thinking, can I refinance my business loan? But unsure where to start, it's important to explore all available funding options and ensure you're making the best choice for your business. At James Murray Finance, we specialise in helping business owners like you find tailored financial solutions that support growth and stability.
Whether you're looking for refinancing options, business debt consolidation, or access to new funding, we can guide you through the process. Learn more about our business finance services.
Can I refinance my business loan with bad credit?
Yes, but your options may be limited. Some lenders specialise in bad credit refinancing but expect higher interest rates. It’s worth checking if your company credit score has improved before applying.
To enquire about a business loan or asset finance Get in Touch
How long does it take to refinance my business loan?
It can take anywhere from a few days to a few weeks, depending on the lender and the complexity of your application.
What fees are involved in refinancing a business loan?
Watch out for application fees, early repayment fees, and any costs for appraisals or legal work. These fees can vary from hundreds to thousands. Ensure the savings from refinancing outweigh these costs.
Finance Brokers normally receive a commission for arranging finance. At James Murray Finance, we are a finance broker with access to a broad panel of lenders through our partnership with Asset Finance Solutions (UK) Ltd, which allows us to offer competitive rates and dedicated underwriting support.
We do not charge you for our service; instead, we’re paid by the lender if you choose one of their products.
We operate under two pricing models: discretionary, where we can adjust rates and commission to meet your needs, and non-discretionary, where rates and commissions are fixed by the lender. Please note that the commission we receive may impact the amount you pay back.
Can I refinance a loan more than once?
Yes, you can refinance more than once, but it’s important to check that it still makes financial sense.
What is the Growth Guarantee Scheme, and how does it help with refinancing?
The Growth Guarantee Scheme (GGS) offers government-backed loans, making it easier for businesses to access funds and potentially better refinancing options. Check if your business qualifies here.
For more information, you can read our guide explaining everything you need to know on the Government-Backed Growth Guarantee Scheme (GGS)
What Types of Business Loans Can Be Refinanced?
Most commonly the types of business loans that can be refinanced are Term Loans and Asset Finance Agreements:
Can I refinance my car loan under my business name?
Yes, you can refinance your car loan in your business. The process typically involves selling the vehicle to your business and setting up a new agreement.
Transferring your personal vehicle finance to your company name is also possible through various lenders refinancing options.
We recommend speaking with a specialist finance broker to explore the best solution for your situation.
Discover your vehicle finance transfer options in our detailed guide
Can I refinance asset finance?
Yes, business asset finance can be refinanced to better suit your company's needs. Whether it's equipment finance or machinery loans, refinancing options are available based on:
Refinancing your business loan can offer significant benefits, from lower interest rates to improved cash flow. It's crucial to carefully assess the risks to make sure refinancing will truly benefit your business in the long run. Always compare lenders and carefully assess the terms to make the best decision for your business growth.
I hope you’ve found this guide on refinancing business loans useful. Please reach out if you would like to explore funding options for your business.
Keep in touch with James Murray Finance for free business and car finance insights and updates. Subscribe to the blog via LinkedIn HERE or follow on social media.
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Thank you for reading
James
Disclaimer: This blog post is intended for informational purposes only and does not constitute financial advice. All information is collated at time of writing and the best efforts have been made to ensure accuracy.
About the author
Meet James, the founder of James Murray Finance. With nearly two decades of industry experience and eight years dedicated to the finance sector, James has worked with a wide range of businesses, from startups to established enterprises. Read More >
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