Insights into the world of small business lending and development

3 Reasons to Refinance Your High Cost Business Debt

This article is from Excelsior Growth Fund, a Venturize supporter.

If your small business is drowning in high cost debt, you might be having a hard time paying your employees, purchasing inventory, or keeping up with other operational expenses. Exorbitantly high interest rates could be preventing you from having the funds your business needs on a monthly basis. If you want to put cash back into your bank account, here are three big benefits of refinancing your loans.

  1. Lower Monthly Payments

One of the biggest benefits of refinancing is that it reduces the amount you owe every month. With a well-structured refinance decreasing monthly payments by 50-80%, your operational costs will become considerably more manageable.

  1. Lower Interest Rates

With lower monthly rates, you’ll accumulate less money owed in interest over the life of the loan. The astronomical interest rates of high-cost debt sometimes force businesses to pay off their loans over longer terms than originally planned. Refinancing can sometimes do the opposite, with savings from lower interest rates allowing you to pay off the principal of the loan faster. This results in a shorter loan term and significant savings.

  1. Higher Credit Score

A low credit score is one of the biggest reasons you have to settle for high-cost debt, and it results in a bad credit utilization ratio (the amount you owe vs. the total amount of credit available to you). By paying off high cost loans, you improve both your credit score and utilization ratio and also open up your options for obtaining loans in the future.

Options for Refinancing

Although it may seem like an obvious choice, it is important that you make sure that refinancing your business loans will actually save you money. Be sure to calculate all of the costs associated with refinancing to determine if your new loan will be less costly.

If traditional lenders don’t offer feasible options for your small business, consider obtaining a loan from a Community Development Financial Institution (CDFI). These nonprofit organizations, such as Excelsior Growth Fund (EGF), are able to provide lower cost funds for refinancing to businesses that fall short of the standards of regular lenders. Read EGF’s detailed guide about when to refinance business debt for even more information.

About Excelsior Growth Fund 

At Excelsior Growth Fund (EGF), our mission is to help New York businesses grow by providing small business loans and advisory services. As a nonprofit organization and a U.S. Treasury-certified Community Development Financial Institution (CDFI), we’re a responsible lender you can trust.

We understand that many small businesses can have difficulty getting traditional bank financing and EGF can help. Our products are affordable and flexible, and our advisory services can help you reach your business goals. Our signature product, the EGF SmartLoan™, provides up to $100,000 through a streamlined online platform.

 

Category: 
Financial tools and management