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Can I lower the interest rate on my business loan?

PUBLISHED ON: 19/11/2023

With fluctuating interest rates and ever-increasing strain on business finances, you might be wondering if you can lower the interest rate on your business loan. It is possible to do this and it can provide welcome respite from negative cash flows and operational restrictions.

Business debt refinancing, or refinancing an existing loan, offers you the opportunity to fine tune your outgoings and build a more stable foundation for growth. So how do you lower the interest rate on your business loan by refinancing?

Refinancing an existing loan

Debt refinancing involves restructuring your loan(s) to improve cash flow. Although the financing you took out originally was probably a good option at the time, it may not now serve your interests as effectively.

This can be the case if interest rates in general have fallen and your business is paying more than necessary to service the loan. Additionally, your business may have evolved to the extent that other borrowing terms are onerous, so what do you need to consider when refinancing?

What to consider when refinancing an existing loan

Protecting your company credit score

When you refinance business debt it’s important not to make multiple applications at the same time. Doing so could seriously damage your credit rating as each application will require the lender to conduct a ‘hard’ credit search.

This leaves an ‘imprint’ on your business credit file and if the application is rejected, can have a long term negative effect on your ability to borrow. So how can you avoid this and source the right refinancing deal without affecting your credit score?

Using commercial finance broker services

A commercial finance broker is able to find the best interest rate deals for refinancing your business loan using whole of market searches. You can narrow down your options without risking multiple hard credit searches and arrive at the lowest interest rate quote that’s most suitable for your business.

How to refinance and lower the interest rate on your business loan

Once your finance broker has found the best refinancing deal and you’ve been accepted by the lender you can repay the original business borrowing using the new loan funds. This frees up the excess money that you were paying so you can save it, put it towards operational needs, or use the money to expand the business.

Your broker will also have ensured that the new deal is cost-effective for you, as there may be early repayment fees due on the original loan that make pursing some deals financially not worthwhile.

You might find that swapping a secured business loan for another type of borrowing is also an option, and would be beneficial in the long term. Invoice finance, for example, can provide extremely flexible funding with lower overall costs.

UK Business Finance are experienced commercial finance brokers and we offer our services free-of-charge to our clients. We’ll guide you on business debt refinancing and ensure that you make the best choices. Please contact one of the team to arrange a free consultation.

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