Refinancing: Replacing Existing Business Debt
Learn when refinancing makes sense, how the process works, and what to consider when replacing existing business loans.
What Is Refinancing?
Refinancing means taking a new loan to pay off an existing one, typically to obtain better terms—lower interest rate, longer term, or different structure. Businesses refinance to reduce costs, improve cash flow, or consolidate multiple debts.
Successful refinancing requires that the benefits outweigh the costs of obtaining the new loan.
Reasons to Refinance
Common motivations for business loan refinancing:
- Lower interest rates to reduce payments
- Extend term to improve cash flow
- Consolidate multiple loans into one
- Remove personal guarantee with stronger financials
- Replace variable rate with fixed rate
- Access equity in appreciated assets
- Exit expensive alternative financing
Costs of Refinancing
Factor these costs into your refinancing decision:
| Cost | Typical Range | Notes |
|---|---|---|
| Prepayment Penalty | 1-5% of balance | Check existing loan terms |
| Origination Fee | 0.5-3% | On new loan |
| Appraisal | $500-$5,000 | For real estate |
| Legal/Title | $1,000-$5,000 | For real estate |
| SBA Guarantee Fee | 0-3.5% | If SBA loan |
When Refinancing Makes Sense
Evaluate refinancing carefully:
- Calculate total costs of refinancing
- Compare to total savings over remaining term
- Consider how long you will keep the loan
- Factor in time and effort required
- Assess likelihood of approval
- Review existing prepayment terms
A general rule: if you can lower your rate by at least 1-2% and plan to keep the loan at least 2-3 years, refinancing often makes sense. Run the numbers for your specific situation.
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Read more →Important Disclosure
Not Financial Advice: The information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. You should consult with qualified professionals before making any financial decisions.
No Guarantee of Financing: Liminal Lending Co. is a business loan marketplace that connects borrowers with third-party lenders. We are not a lender and do not make credit decisions. Submitting an application does not guarantee approval or funding. Loan terms, rates, and availability vary by lender and are subject to borrower qualifications and lender criteria.
Third-Party Lenders: All loan products are offered by independent third-party lenders. Liminal Lending Co. is an Independent Sales Organization (ISO) and receives compensation from lenders for successful referrals. Terms and conditions of any loan are between you and the lender.
Rate Information: Rates, terms, and fees mentioned in this article are estimates based on publicly available information and may not reflect current market conditions or specific lender offers. Actual rates depend on creditworthiness, business financials, and lender policies.
Information May Change: Financial markets, lending regulations, and economic conditions are subject to rapid change. While we strive to keep our content accurate and up-to-date, information in this article may become outdated. Always verify current rates, terms, program availability, and regulatory requirements with lenders and official sources before making financial decisions.