Business Debt Refinancing

Refinancing your business debt can be a lifesaver when you need cash fast. It can give you a better deal than you thought possible!

If you are struggling to pay off your business loans, you may not realize that another option is available to you.

You could refinance your business debt into a lower-interest-rate loan. This means that instead of paying high interest rates, you would only pay a small percentage of the total amount owed each month.

Refinancing Debt with the SBA 7(a) Loan in San Diego

Business owners who have been turned down for traditional bank financing because they do not meet their credit score requirements or because they don’t have enough collateral in place can use an SBA 7 -guaranteed loan to refinance their existing debt and get a better deal on their money.

Debt refinancing with an SBA-guaranteed loan is a great way to save money while still getting the capital needed to grow your business.

It also allows you to improve your credit rating by showing lenders you are responsible for managing your finances.

The SBA 7 -Guaranteed Loan Program offers several advantages:

• It allows you to borrow up to $2 million without putting any collateral up as security.
• The SBA will guarantee 100% of the funds borrowed.
• There is no prepayment penalty.

Your company’s business growth depends on access to capital. If you have tried to borrow from a bank but were denied, you might borrow from the Small Business Administration .

With the SBA 7 Guarantee, you can borrow up to $2M without putting up any collateral. You’ll receive a 100% guarantee on all the funds borrowed.

There is no prepayment penalties so you can take advantage of the lowest interest rates when you need them most.

The data shows that about 22% of small businesses with 100-500 employees were owned by women, a percentage that rises the smaller the business. (en.wikipedia.org)

Should You Refinance – Or Shouldn’t You?

Business growth depends on access to capital. When you’re looking at ways to finance your business, one of the first things you should ask yourself is whether you really need to borrow more money right now.

While it’s true that every business needs some level of investment capital to grow, you might find that you already have enough cash flow to cover your current expenses.

If you’ve got the cash coming in, why would you need to borrow more?

Your business operations depend on your ability to make payroll, pay bills and buy inventory. If you’re able to generate enough income to cover these costs, you probably don’t need additional funding right now.

However, if you’re facing financial challenges, look at refinancing your existing debt.

Refinancing your debt can help you reduce monthly payments, cut back on interest charges and even allow you to merge multiple debts into one manageable payment.

What is the Big Deal About Refinancing a Business Loan?

Having cash for operations is essential to running a successful business. But sometimes, businesses run out of cash before they run out of time.

If this happens to you, you may be tempted to raise another round of equity or sell off assets to keep your doors open. However, both options come with risks.

A second round of equity raises often require a lot of personal savings, which can be difficult to come by. And selling assets usually requires finding buyers willing to overpay for what you own.

Your cash flow history is important because it tells lenders how likely you are to repay their loans. Lenders use this information to determine how much risk they are taking by lending you money.

For example, if you have had trouble repaying past loans, lenders may not be willing to lend you money again. They may demand higher interest rates or insist on collateral.

By refinancing your existing debt, you can lower your monthly payments and eliminate the possibility of losing your business due to lack of financing.

By the Federal Reserve estimates that about 70% of small businesses have outstanding debt. (uschamber.com)

What Documentation Do I Need to Provide?

Daily cash flow requirements vary depending on the type of loan being considered. For example, small-dollar loans typically require less paperwork than larger ones.

The amount of documentation required will also depend on the lender. Some lenders may request copies of your tax returns, while others may only require proof of employment.

Regardless of the type of loan you apply for, there are certain documents you must include:

1. A copy of your latest IRS Form
2. Your most recent bank statement
3. Copies of any notes receivable from customers
4. Copies of all invoices paid
5. Any balance sheets or profit/loss statements
6. Proof of ownership of equipment or vehicles
7. Documentation showing your net worth
8. Financial projections
9. Other relevant documents as requested by the lender

You’ll also need to prove your creditworthiness. This means providing evidence of your ability to meet future obligations.

Refinancing with the SBA 7a is Available for What Types of Debt?

Business finances are complicated. In order to get the best deal possible, you’ll want to speak with an experienced banker who knows your industry inside and out.

That’s where we come in. We’ve been helping our clients refinance their commercial real estate loans since 2019.

We understand every situation is unique so we work closely with each client to find the best solution for them.

Our team has helped thousands of businesses like yours save hundreds of thousands of dollars through refinancing.

We define eligible business operating expenses as those expenses incurred by a business that is necessary for its normal operation and maintenance. That includes rent, payroll, utilities, insurance, taxes, repairs, supplies and other recurring costs.

Besides eligible high-cost business debt, certain types of capital expenditures qualify as well. These include improvements made to buildings, machinery, vehicles or equipment.

Who Can Refinance Debt with a SBA 7a Loan?

Any business owner who meets eligibility requirements can benefit from refinancing. The following individuals are eligible to receive a SBA 7a Loan:

• Business owners
• Partnerships
• Corporations
• Limited Liability Companies
• Trusts
• Joint ventures
• Sole Proprietors

Troubled business debt restructuring programs such as bankruptcy, Chapter 11 reorganization, and Chapter 13 liquidation do not count toward eligibility.

If you’re interested in learning more about access to business capital and how a SBA 7a would help your business, contact us today!

Who Guarantees the Loan?

The amounts of business debt available under the SBA 7a program are limited. As a result, borrowers often turn to private investors for additional financing.

Private investors provide funding for qualified borrowers at higher interest rates than what the government offers. However, they don’t guarantee repayment of the loan.

This means that if the borrower defaults on the loan, the investor loses his money.

To protect themselves against this risk, lenders usually require collateral. Collateral is property pledged by the borrower to secure payment of the loan.

Affordable business loans backed by the U.S. Small Business Administration offer a way to reduce the risk associated with private investment.

The borrower’s assets, which typically include inventory, accounts receivable, equipment, furniture and fixtures, and real estate secure A SBA 7a loan.

Since these assets are owned by the borrower, lenders know they will be paid back even if the borrower cannot pay off the loan.

What About Credit Card Debts?

Business credit cards are an important tool for many small businesses. They allow entrepreneurs to make purchases without having cash upfront.

However, using credit cards for personal spending can quickly put a strain on a company’s finances.

Many companies have found it difficult to repay their credit card bills when they need to borrow funds for working capital needs. This can lead to missed payments and late fees.

These penalties can cause a company to lose customers and damage its reputation.

Fortunately, there’s another option.

Business debt consolidation options like SBA 7a Loans can help you get out of debt while allowing you to keep up with your obligations.

Pros and Cons of Refinancing Business Loans

Your business debt restructuring scenario may look different depending on whether you want to merge or refinance your existing debt.

Here’s what you should consider before deciding between these two options:

• Consolidate your debt

By consolidating all of your current debt into one monthly payment, you’ll save time and money. You’ll also avoid paying any extra fees for late payments and over-the-limit charges.

You’ll also be able to take advantage of lower interest rates and flexible terms offered by most financial institutions.

• Refinancing your debt

Refinancing allows you to spread out your payments over a longer period. This makes it easier to budget and plan.

You’ll also benefit from lower interest rates and shorter term loans.

It’s important to note that refinancing doesn’t mean that you’ll end up saving money. It depends on the type of loan you choose and how much equity you have in your home.

Making the business decision to work with a business financing company like us is easy. We’re here to help you find the right solution for your unique situation and reach your business goals. Just call us today!

• Business Debt Consolidation Services

If you think you might qualify for a debt relief program, we encourage you to contact us as soon as possible so we can determine if you meet our eligibility requirements. Our representatives are available 24 hours a day, seven days a week.

The3 Most Important Steps Regarding Business Loan Refinancing:

To successfully refinance your business debt, follow these three simple steps:

1. Determine which type of loan best suits your needs.
2. Find a reputable lender who offers competitive rates and terms.
3. Apply online and submit your application within minutes.

We hope this helps answer some questions about getting a SBA 7a Loan. A business lending specialist will be happy to assist you with your specific needs.

“Graduation” Debt Refinancing

Business health factors such as growth, profitability, cash flow, etc. play an important role in determining the amount of debt you can afford to carry.

The more profitable your business becomes, the less debt you can comfortably manage.

This is especially true for small businesses.

In fact, many experts recommend that entrepreneurs start off with only 10% of their annual revenue in outstanding debt.

Consistency

Business loan debt refinancing is not always a good idea.

For example, if you decide to refinance your business debt at the height of your business cycle, you could wind up carrying too much debt.

That’s because refinancing your debt during periods of top activity can make it difficult to maintain consistency.

What Does This Mean?

It means that you might need to cut back on certain expenses or even close your business temporarily until things settle down again.

It’s better to wait until you’ve achieved a consistent level of profitability before you consider refinancing your debt.

However, if you decide to go ahead with refinancing, there are several ways to minimize the impact it has on your business.

One way is to use a combination of short-term and long-term debt.

Another option is to reduce your overall debt load by using credit cards instead of borrowing against your business assets.

Incremental Refinancing

You may also want to consider incremental refinancing.This refers to refinancing only part of your existing debt.

For example, you could refinance $50,000 worth of debt into one loan with a lower interest rate. Or, you could take out another loan, but pay it back early and then apply the extra funds toward your current debt.

With either approach, you should still be able to keep all of your other complex investments paid on time.

How Do You Handle Prepayment Penalties?

Finally, if you’re planning to prepay any portion of your debt, be sure to factor in the associated fees.

Some lenders charge higher fees when borrowers prepay their loans.And remember, prepaying your loan could trigger additional charges. So, it’s important to understand what those fees entail before proceeding.

Also, be aware that most lenders require prepayment penalty waivers from borrowers.These waivers allow borrowers to avoid paying penalties when they prepay their debts.

A substantial benefit of these waivers is that they protect borrowers from having to pay penalties on amounts they owe prior to maturity.

Do You Have a Tax Obligation That You Need to Get Rid of Before Applying?

The loan process will likely include some questions about your personal finances.If so, you’ll probably be asked whether you have any federal income taxes due. As a result, it’s important to know how much money you owe Uncle Sam.

Fortunately, there are several online tools that can help you calculate your tax liability.

Conclusion

Business debt refinancing is an excellent strategy for small businesses. But, it’s important to choose the right lender for your needs. You’ll need to carefully weigh the pros and cons of refinancing your debt before making a final decision.

Remember, though, that refinancing your debt doesn’t guarantee success.

Instead, it’s just one tool among many that you can use to improve your financial situation. We strive to make lending simple and affordable. We’re committed to helping our customers build long-term relationships based on trust and integrity.

To learn more about these options, please call us at (888) 653-0124 today!

Have Any Additional Questions?

FAQs for Business Debt Refinancing