Running a small business often means taking every chance to grow. One month it might be replacing a broken delivery van, another month it could be ordering extra stock before the holidays. Before long, those choices can stack up into several loans with different rates and repayment dates, leaving you spending more time on paperwork than on growing your business.

Refinancing offers a way to reset. By replacing one or more existing loans with a new one, you can lower borrowing costs, improve cash flow, and simplify repayment.

Here’s what you need to know about small business loans before making the switch.

What is small business loan refinancing?

When you refinance a small business loan, you take out a new loan to pay off your existing debt. The goal is to secure better terms, such as a lower interest rate or longer repayment period. Once the old loans are paid off, you make payments on the new loan going forward.

It’s not the same as a loan modification, where you work with your current lender to adjust terms, and it’s slightly different from loan consolidation, which typically combines multiple debts into one payment but doesn’t always reduce the cost of borrowing. Refinancing, on the other hand, is about finding a new loan that improves your interest rate, repayment period, or monthly payments.

Signs its time to refinance a business loan.

Refinancing can be a powerful tool, but timing matters. Here are a few signs it may be the right move:

  • Your interest rate is higher than today’s market rate. If rates have dropped since you took out your loan, refinancing can help reduce your borrowing costs.‍
  • You’re managing multiple loans. Different due dates, interest rates, and terms can make debt management a stressful process. Consolidating into one loan simplifies repayment.
  • You face seasonal ups and downs. If your revenue cycles with the seasons, refinancing to a loan with more flexible terms can help stabilize cash flow.
  • Your business has grown stronger. An improved credit score or higher revenue may help you qualify for better loan terms than when you first borrowed.
  • Cash flow feels tight. Extending repayment terms may lower your monthly payment and give you breathing room.

Benefits of refinancing a business loan.

Done wisely, refinancing offers clear advantages:

  • Room to plan ahead. A clearer repayment schedule gives you the ability to map out budgets and growth strategies with more confidence.
  • Improved lender relationships. Demonstrating that you can successfully refinance and manage debt may open the door to larger or more flexible funding in the future.
  • Access to new opportunities. With healthier cash flow, you may be able to take advantage of supplier discounts, bulk purchasing, or investments you had previously put on hold.‍
  • Better financial image. A streamlined loan structure can make your balance sheet look stronger, which can strengthen your business profile when you’re looking for investors or applying for additional financing later on.

What you should know before refinancing.

Refinancing isn’t risk-free. Before making the leap, weigh these considerations:

  • Prepayment penalties. Some lenders charge a fee if you pay off your loan early. So, check your current loan agreements before moving forward.
  • Cost of extending terms. Lower monthly payments often mean a longer repayment period. Over time, you could pay more in total interest.
  • Risk of re-leveraging. Freeing up cash doesn’t mean it’s wise to immediately take on more debt. Think strategically about how you’ll use the savings.‍
  • True savings vs. fees. Compare the total cost of the new loan, including origination fees, closing costs, or other charges, against your current debt.

How to refinance a business loan step by step.

Refinancing may feel intimidating, but the process is straightforward if you break it down:

  1. Review your current loans. Make note of balances, interest rates, fees, and repayment schedules.
  2. Evaluate your business finances. Lenders will want to see your credit score, revenue trends, and cash flow.
  3. Shop for better terms. Compare multiple lenders in one place through Lendio’s loan marketplace.
  4. Apply with documentation. Expect to provide financial statements, tax returns, and copies of your existing loan agreements. For a refresher, see our guide on how to get a business loan.
  5. Close and pay off old debt. Once approved, your new lender issues funds to pay off existing loans, leaving you with a single new repayment plan.

Alternatives to refinancing.

Refinancing isn’t the only option. Depending on your circumstances, you might consider:

  • Loan modification. Ask your current lender if they can adjust your rate or extend your repayment schedule.
  • Debt consolidation. Roll multiple debts into one loan (sometimes without reducing the total cost).‍
  • Business line of credit. If your primary concern is uneven cash flow, a revolving line of credit could provide you with greater flexibility.

How Lendio helps small businesses refinance debt.

Refinancing can feel overwhelming when you already have a business to run, but it doesn’t have to be. Through the Lendio Marketplace, you can compare options from more than 75 lenders with just one simple application. Many business owners receive offers within minutes and funding in as little as 24 hours.

If you're finding that high interest rates and overlapping loans are sapping your focus and your cash, refinancing offers a chance to pause and reset. By understanding what you pay now and comparing it to what a new loan could offer, you can decide if refinancing will put your business on steadier ground.

Our mission is to make that process as transparent and quick for you as possible so that your business has the freedom to grow and thrive.

Start exploring your refinancing options today.

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