Small business owners often struggle when dealing with large amounts of business debt. Unfortunately, using more credit than your finances allow makes it difficult for small businesses to stay afloat.
Even with high credit utilization (the amount of debt your business has compared to its ability to repay), you may be able to refinance business debt, allowing your business some flexibility and a better shot at future growth.
A few of the advantages of refinancing business debt may include:
Choosing the right type of loan for your business may take time and require you to connect with different lenders to determine the best option.
Term loans from banks and traditional business lines of credit can help refinance business debt as part of a larger small business loan, but can be difficult to obtain due to stringent credit and collateral requirements.
Small Business Administration (SBA) lending programs are government-guaranteed loans that have fewer hurdles for small business owners with less-than-perfect credit or high credit utilization. Specifically, SBA 7(a) loans can be useful for debt refinancing and have favorable terms compared to bank loans.
Some non-bank lenders may also have less strict requirements, but diligence is necessary to ensure your business is getting a fair deal. One of the best options for a non-bank loan is through a Community Development Financial Institution (CDFI). These lenders are primarily mission-based, making refinance loans for women, people of color and veterans that yield a positive community impact.
If you qualify for a loan, your small business can refinance any type of business debt from any creditors, including credit cards, high-interest business loans and more.
It’s important to assess what you can afford to pay each month in order to find the best interest rates and terms for your business, but remember that there will be service fees and closing costs associated with refinancing your small business debt.
Getting out from underneath small business debt is a challenge for many entrepreneurs. Fortunately, there are resources that can help you refinance your small business loans and put your business in a position for future success.