Guide to Business Debt Refinancing

1. Establish a clear need to refinance. A company often refinances to improve its cash flow and get access to more working capital. But be sure you exhaust other options that may be cheaper in the long run. For example, can you sell assets instead?
2. When refinancing a secured loan you will usually be able to finance up to 80 percent of the value of the collateral. The loan period varies and depends on the amount of the loan, the collateral and how much risk the lender perceives.
3. Analyze the true costs of the refinancing. Compare interest rates and terms, including annual interest rate, total finance charge, service fees, debt reduction fees, listing fees. Learn the background of the lending institution, its track record and exactly how its refinancing debt plans work.

Tips & Tactics
Helpful advice for making the most of this Guide

• Be prepared to show lenders a personal guarantee, three years of financial statements, tax returns, lease or purchase agreement of the property where your business is located and credit card statements.
• Ask yourself hard questions before you assume new debt: Do you have sufficient assets to convince a bank to extend credit? Do you have the support of investors? Can you meet future financial and operating demands of another debt?
• Keep a good relationship with your creditor. Be honest, timely and consistent with your communications and commitments.

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