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Can I lower the interest rate on my business loan?
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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Matt Cluer
Finance Expert
Matthew has over 15 years’ experience of working alongside businesses across the UK supporting directors, shareholders, and key stakeholders. At UKBF Matthew works tirelessly to secure the funding companies need when they need it. Adept at raising finance through invoice and asset-based lending, crowdfunding, loan and equity funds as well as Government schemes, Matthew is perfectly placed to help your business access the funding required whether for general working capital, or to embark upon an ambitious growth and expansion project.
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We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
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A commercial finance broker plays an important role for businesses looking for funding. They can source the most suitable types of finance using a whole-of-market search strategy whilst also accessing the best deals and lenders.
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Managed well, debt can improve your credit rating, enable expansion, and stabilise cash flow. It’s the backbone of growth but with so many different types of borrowing now available, it’s important for your business to carry ‘good debt’ rather than ‘bad debt.’
How to best prepare my company for a finance application
When preparing your company for a finance application, it’s key to present the business in its best light whilst also providing realistic projections, your plans for the funding, and how it will help the business grow.