Time To Refinance? Here's What You Need To Know

Nathalie Jones

Wednesday, 17 August 2016

Starting-up a business is expensive. We’re thinking about purchasing equipment, fit-out, bond, insurance and incidental costs. Perhaps you borrowed money from family and friends for the initial setup. Perhaps you took out a personal loan, using your own credit history or property as a guarantee.

It can be difficult to break into the market and get your small business going, but once you’re on the open road you’ve probably got the mental space to take another look at your finances. The only problem is that years later once you’ve started having some success, you’re still paying the high cost of a startup loan. One of the things you might want to think about is refinancing.

Just as you take a look at your mortgage every 3 - 5 years, you should be looking at refinancing your business loan every 2 - 3 years to make sure you’re getting the best rate.

Why refinance your start-up loan?

The potential benefits of refinancing your startup loan are:

  1. Gaining a lower interest rate now that the business is more successful and less risky;
  2. Restructuring the debt so that the repayments match your cash availability;
  3. Gaining more flexible features in a debt product to meet your business needs;
  4. Increasing your overall borrowing to give you access to new growth or strategic opportunities;
  5. Consolidating debts to simplify financials and lower overall repayments (e.g. moving credit card debt into your business loan); and
  6. Releasing personal or business assets from security arrangements so that they can be used for other purposes (e.g. freeing up equity in your home to enable the purchase of an investment property).

Given the potential repayment, cash flow and security benefits, it is always smart to check what refinancing can do for you. Best case scenario: you save a lot of money. Worst case: you stay with your current arrangement. You have nothing to lose.

The practical impact of refinancing your start-up costs

Refinancing your startup may require very little effort or a lot depending on the complexity of your current debt.

Some requirements that you should be aware of include:

  1. Having to change lenders and going through some sort of customer onboarding process with a new organisation will take some time;
  2. Before shopping around for a new lender it may help to make a list of all the accounts you use in your business;
  3. The repayment amount or term of the loan may be different, so be ready to adjust to a different schedule;
  4. You may be asked to increase or decrease the security offered to the lender/s; and
  5. Getting your head around the different product types offered by various lenders will involve some leg-work.

If you’re ready to refinance, check out Valiant’s small business loans marketplace or have a no-obligations chat to our team of credit specialists.


Nat is the Communications Manager at Valiant Finance. She has a double degree in Journalism and Law, and a background in the fintech space, hailing from Asia's largest fintech hub, Stone & Chalk.

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