Key Takeaways
- When you refinance a business loan, you take out a new loan to get better terms and rates than your current loan.
- People often refinance to get lower interest rates, improve their cash flow, consolidate debts, or access more funds.
- Some possible downsides to think about are fees, early repayment penalties, and longer loan terms.
- In Australia, both banks and non-bank lenders offer refinancing options, but the rates and eligibility requirements are different for each.
- The first thing to do is look at how much you need to borrow, and then look into the options for refinancing.
- Our team at Dark Horse Financial can help you find the best deals and walk you through the whole process.
- In the end, refinancing should help you reach your business goals and keep your finances stable in the long run.
Business debt is one of the most common financial responsibilities that come with running a business in Australia. Debt is a big part of business growth, whether it’s a loan to buy equipment, cover working capital, or pay for growth. But what if the payments on those loans become too much to handle, or you find a better deal somewhere else?
This is when you look for refinancing for your business loan. We’ll go over everything you need to know about refinancing a business loan, including what it means, why you might want to do it, the pros and cons, and how to apply for refinancing in Australia.
What Does It Mean to Refinance a Business Loan?
To refinance a business loan means to replace your current business loan with a new one. The new loan ideally has better rates and terms, which should leave you with lower payments or more flexible terms.
Business loan refinancing can apply to a range of loan types, including term loans, equipment finance, commercial property loans, or even multiple debts consolidated into one.
It’s a way to manage your money that can be very helpful for small business owners who want to make their finances easier or get more cash flow.
What Is the Purpose of Refinancing?
In simple terms, the purpose of refinancing is to improve your financial position. Whether you’re aiming to save money, manage repayments more easily, or unlock equity in your business, refinancing can help align your debt with your current financial needs and future goals.
Refinancing is popular among Australian small businesses looking to optimise their finances, especially when market conditions change (e.g., when interest rates drop).
Why Would You Refinance a Business Loan?
1. Lower Business Loan Refinance Rates
You might be able to get a better rate if interest rates have gone down since you first took out your loan or if your business’s credit score has improved. A drop of 1% to 2% can save you a lot of money over time.
2. Improved Cash Flow
Refinancing can make your loan term longer, which means you have to pay less each month. This can be very helpful for businesses that are having trouble with their cash flow in the short term.
3. Debt Consolidation
Refinancing can help you combine several business loans or debts into one loan with one payment. This can make your finances easier and lower the total amount of interest you pay in some cases.
4. Access to Additional Funds (Cash-Out Refinance)
Some lenders offer a cash-out refinance business loan. This means you can borrow more than what you owe on your current loan and use the extra money for business purposes, such as buying inventory, hiring staff, or paying for marketing campaigns.
5. More Flexible Loan Terms
If you refinance your business debt, you might be able to get better loan terms, like only paying interest during slow times or being able to make extra payments without having to pay a fee.
Risks of Small Business Refinance Loans
Business loan refinancing is usually a smart financial move, but it’s prudent to know the potential risks involved as well:
- Potential Penalties: Some lenders charge penalties for paying off your loan early, especially if your current loan is fixed.
- Other Fees: Watch out for application fees, establishment fees, and other charges that may make the new refinancing loan more expensive.
- Potentially Higher Long-Term Costs: Extending your loan term may reduce monthly payments but increase the total interest paid.
- Risk of Overleveraging: Refinancing could tempt you into taking on more debt and can endanger you financially.
Can You Refinance Your Business Loan?
Yes, you absolutely can refinance your business loan as long as you meet the lender’s eligibility criteria. These may include:
- A good repayment history on your existing loan(s)
- A reasonable credit score (though bad credit options exist)
- Demonstrable capacity to service the loan
- Up-to-date financials (for full-doc loans)
Most Australian banks and non-bank lenders offer business loan refinance options, though their terms and criteria vary. It’s also possible to refinance with your existing lender, but it’s mostly done by switching to a new one.
How to Refinance a Business Loan in Australia
Here’s how to apply for refinancing in Australia:
Step 1: Assess Your Current Financial Position
Review your existing loan’s interest rate, fees, and repayment schedule. Ask yourself:
- Are the repayments affordable?
- Can I get a better rate elsewhere?
- What’s the remaining term?
Step 2: Apply Easily Online
Apply for a business loan refinance through our online form. It only takes a minute to fill out, and you’ll get a response promptly. We’ll discuss your financial situation and match you with a lender that can provide the refinancing loan that meets your needs. We’ll also ensure to get the lowest rates possible and favourable terms.
Step 3: Apply and Wait for Approval
We’ll submit your application on your behalf. Approval times vary. Some non-bank lenders can approve applications within 24–48 hours, while banks may take a few days to a week or more.
Step 4: Get Approved and Refinance Your Loan
Once the new loan is approved, sign the agreement, and the funds will be disbursed shortly. Use the proceeds to repay the old loan in full. Moving forward, you will only need to repay the new loan with possibly better rates and terms.
When Is the Best Time to Refinance Your Business Loan?
- Interest rates have dropped
- Your business has grown or become more profitable
- Your credit score has improved
- You’re struggling with repayments
- You want to access additional funding
- You want to consolidate several loans
When Not to Refinance Your Business Loan
- Interest rates have risen
- Your credit score has dropped
- You’re close to paying off your existing loan
- Your current loan has high exit fees that outweigh potential savings
- You’re refinancing just to access cash without a clear repayment plan
Final Thoughts: Is Business Loan Refinancing Right for You?
Refinancing a business loan is a smart financial move for a lot of Australian businesses. It can lower your interest payments, open up better terms, improve your cash flow, and even help you grow your business.
That being said, you should think about the pros and cons. Make sure that the new loan really helps your finances and that you aren’t refinancing to a loan that is worse.
Think about your needs and talk to a broker or financial advisor who knows a lot about small business finance before you decide.
Disclaimer: Loans and their accompanying benefits are available only to those who qualify for them and have been approved. Though we put a lot of care into writing this article, the information presented within is general and doesn’t consider your unique situation. It is not meant to serve as a substitute for professional advice, and you should not rely on it solely for any major financial decisions. You should always consult with a professional when you’re dealing with finance, tax, and accounting matters.
Refinance Your Business Loan Today
Ready to secure better rates and terms? Apply for a business loan refinance through Dark Horse Financial and enjoy a streamlined process with the best possible rates and terms. Reach out today to get started.
