Middle-market business owners, investors, and their advisors turn to Symmetrical to address the complex transactional requirements that drive real value in today’s competitive world. Our experienced professionals have a track record of innovation and transactional expertise and help our clients achieve their desired outcome.
A common question business owners and investors ask is “When is the right time to refinance my business?”
Refinancing your business will open the door for many of your future endeavors. Consolidating existing loans can be used to lower monthly payments, pay off existing debt at a faster rate, or to allow for an increase in cash flow. Our team has put together a list of reasons why you now may be a good time to consider refinancing your business.
Lower monthly payments
In refinancing your business, you may find that a better interest rate will allow for lower monthly payments on a loan. Especially if your business is planning on staying around for many years to come, a change in interest rates by even the smallest percentage can save your business thousands of dollars in the long run.
Secure interest rates
If you have a variable interest rate loan, refinancing can bring you the security of knowing that the rate won’t change by locking in a fixed rate. With the Federal Reserve contemplating rate increases in the coming months, now might be the opportune time to refinance. While many companies think the impact of increased rates will be manageable, some economists highlight that the interest payments for companies who have issued low-grade debt could rise more quickly.
With the savings you will acquire from lower monthly payments, you will have the freedom to use the extra money in many different ways. Whether you wish to use the savings to pay down other high interest balances or put it back into your company to grow your business, the extra capital can only be seen as a positive gain.
Take equity out of your business
In many cases, businesses are financed by an owner’s equity. Refinancing may provide the opportunity for you to replace some of your equity with debt, while still maintaining the same monthly payment. See dividend recapitalization.
Adjust your timeframe
Many people also decide to refinance to either reduce their loan term or increase it to buy them time. While reducing your loan term from a 10-year loan to 3-, 5-, or 7-year loan will allow you to pay it off in full faster and decrease your interest paid; some businesses refinance for a longer period of time to lower the payment.
Whether you’re looking to save money and increase your balance sheet, aggregate and pay-off other loans or you’re just hoping to use the capital to grow your business … refinancing may be the right move. If your business is considering refinancing as an option to achieve strategic goals, our team is available to assist you with evaluating this option.