Partner + Small Business
4 reasons to refinance your business debt
Ever feel like it’s gotten more difficult to find affordable financing to run your business? Don’t worry – it’s not just you.
Traditionally, small businesses were able to rely upon traditional banks for loans and refinance options. Then the Great Recession hit. Since then, banks have dramatically reduced their lending to small businesses.
After getting the cold shoulder from their banks during the credit crunch, many entrepreneurs turned to other, higher-interest lenders or credit cards instead to fuel their business. In fact, about one in five business owners reporting becoming overly reliant upon credit cards or lines of credit last year.*
There are plenty of responsible ways to use credit cards – but depending on short-term financing to cover your long-term business needs just isn’t sustainable. If you’re feeling stuck in a downward debt spiral, it might be time to consider refinancing your debt with a lower-rate business term loan.
But don’t just take it from us. A number of our borrowers choose to use a portion of their funds to refinance higher-interest existing debt – and many, like Anna Larsen, owner of Siren Fish Co., feel a sense of relief immediately. “As a small business owner, I like that my fate is is my own hands. Funding Circle gave me the freedom to refinance bad offers and plan for my business’s future, not just worry about day-to-day debt and expenses.”
Here are four reasons to refinance today:
1. Make your life easier.
Tired of juggling multiple bills, due dates, and interest rates? If you have debt with more than one credit card or merchant cash advance, refinance to keep track of just one payment, instead of several. Simplifying your financial life via consolidation can make it easier to plan your budget ahead of time.
2. Save money with lower interest rates.
One of the biggest reasons to refinance your debt? Switching to an interest rate that’s lower than what you’re currently paying. Interest charges can keep you in debt much longer than you need to be, and decreasing your rate by even a few points can save you big bucks in the long run. Win-win: reinvest your savings to pay off your debt principal even faster!
3. Focus on what matters most: growing your business.
Refinance your short-term debt into a longer term loan with lower payments to improve your current cash flow. With more working capital available month-to-month, things like payroll and slow account receivables don’t have to feel like an existential threat. Bonus: paying off short-term creditors can help shield you from unnecessary collections lawsuits!
4. Improve your credit score.
Last but certainly not least, consolidating your credit card and short-term debt could also rejuvenate your credit score. When you refinance with a business loan, you may see a jump in your score within a few months because you’re reducing your credit utilization ratio. Your credit utilization ratio is the amount you owe on your credit cards relative to the total amount of credit you have available – and it affects a whopping 30 percent of your credit score!
If you’re ready to refinance your business debt, apply for a term loan with Funding Circle today! It only takes 60 seconds, and doesn’t ding your credit score to check your eligibility.
* National Small Business Advocate. 2015 Year End Economic Report.