Getting Out of Your Commercial Loan

Often we will present more attractive rates and terms to businesses that already have a loan for their business needs. There are a couple things you need to know if you want to get out of your commercial loan. Refinancing is a great way to get a loan structured the right way. In this economy, with rates so low, restructuring your business debt into one loan can save you a significant amount of interest expense. Cash flow can also be improved depending on how the debt is structured.

Refinancing can have it’s draw backs too. If you have an SBA loan it can be difficult to get a refinance done if you must get another SBA guarantee. If you can qualify for a conventional loan you shouldn’t have a problem. SBA does not like to refinance SBA related debt.

Be aware of prepayment penalties. These can go from 1% on up. Depending on market rates you could pay up to 13% of the loan amount in a prepayment penalty on a yield maintenance premium. Make sure you know what it will cost you to get out of the loan you currently have. Get a payoff quote form your lender right away so you don’t waste your time pursuing a loan that you really cant afford to get.

Evaluating the savings from the new loan and the expenses to get out of your old loan will define the true opportunity cost. This should help you decide whether a refinance is a good idea for your business.

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