Here are three reasons to refinance your existing loan

Updated: March 14, 2022 at 5:47 am
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    The loans you are currently servicing may not be right for where your business is now. Taking a look at these loans could help your business move forward faster

    Refinancing is the practice of taking an existing loan and borrowing the money again. 

    Why would you want to do that?

    Get a better deal

    The most obvious reason to refinance is because you can get a better deal. For example, many businesses took out loans under CBILS at the beginning of the Covid pandemic. 

    Understandably, these loans were taken out when businesses faced an uncertain future. Nobody knew when things would reopen and CBILS loans often came with a long payment holiday. 

    When things became more certain and the payment holiday was over, many customers found that the loan products they had taken out were far from the best value. Refinancing meant that businesses could save substantial sums on their monthly payments. 

    GOOD TO KNOW: The deal you get often depends upon your credit score, which improves when you show that you are a responsible borrower. If you keep up regular repayments, your credit score may improve before you’ve reached the end of the lifetime of your existing product.

    Borrow more money

    You need to buy some new equipment for your business but you can’t afford to while you are still paying off a loan. The answer? Increase your borrowing to incorporate the cost of the equipment – or whatever it is you need. 

    With loan terms stretching from months to years, it is often the case that companies borrow for the short term rather than consider longer-term expenditure. 

    Before you borrow money ask: is this enough? Will I need to borrow more to cover additional expenses further down the line?

    But there is no shame in finding that you need more money than you thought you might need- after all, the needs of growing businesses change. 

    Consolidation and diversification

    Sometimes finance is like a game of Tetris: you can fit a lot more in when you have structured everything properly. 

    One of the obvious ways that you can use the power of refinance is to add existing loans together and get a lower interest rate. This is especially the case if you are considering a commercial mortgage. If you are looking at buying major assets for your business, or simply have a large number of different plans taken out to cover varied expenses over the years, putting them all in one place can help you manage your borrowing more easily and probably save you money. 

    Alternatively, you may wish to diversify. There are a large number of specialist financial products on the market, such as short term VAT loans. Seasonal businesses find VAT loans helpful as they improve cashflow by evening out the quarterly VAT payment into three lower monthly installments. It might make sense for your business to concentrate most of the company’s borrowing into a commercial mortgage and have short term loans in addition to covering such short term spending. 

    Could you benefit from refinancing your existing loans? Sign in to your Swoop account and find out how much you could be eligible to borrow, or arrange a financial review with one of Swoop’s funding managers here

    Don’t waste time, there’s plenty of funding and saving solutions to help your business grow

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