Refinancing your business loans

What is refinancing?

To refinance means to adjust or change existing loans. You replace a loan you have with another loan. This can be with the same bank or lender or with a different one. 

Why should I refinance?

You usually refinance your business loans because you want better terms and lower costs. In the following situations, refinancing is a good solution:

• you pay a high interest rate now. If market interest rates are more favourable, or your own risk profile has improved, a new loan may be cheaper.
• your monthly costs are too high. If you agree on a longer term, your monthly costs will be lower. This gives you more financial felexibility.
• you have multiple loans. For example, you have a business loan, a credit with a supplier, and a lease contract. This can be confusing and is often more expensive. By refinancing, you combine all your loans with one party.
• you want to invest in growth. You can also combine refinancing with extra credit to purchase stock or new machinery, for example.
• you want to get rid of unfavourable conditions. With your existing loan(s), you may need compulsory insurance or have to pay high penalties if you want to repay earlier. With a new loan, you can make different arrangements.

When can I refinance?

You can usually refinance at any time. So, at the end of the term, at the end of the interest rate grace period, or in between. Bear in mind that refinancing may incur additional costs. For example, closing costs, an early repayment fee, and an administration fee. These extra costs may cause financial problems. So, be sure to carefully consider refinancing at the right time.

What should I look out for when refinancing?

Refinancing can give you financial benefits, but there are also risks involved. Consider the following points:

• total cost. Lower monthly costs are attractive, but pay attention to the total cost. A longer term often means you pay more interest in total over the whole period.
• penalty for early repayment. Refinancing is possible throughout the term of your financing. But often a penalty applies if you repay a loan early. Calculate whether refinancing is still in your favour if this is the case. 
• new conditions. Read the contract for the new financing carefully. Sometimes you will face extra requirements such as compulsory insurance or collateral.
• fixed-interest period. Check how long the interest rate you agree is fixed and what happens to it afterwards. Are you switching from a fixed rate to a variable rate? Then you run the risk that your interest rate will rise in the future, increasing your monthly charges.

How do I arrange refinancing?

Are you interested in refinancing? Prepare yourself with the following steps:

1. Make an overview of the loans you have running and what you pay for each loan per month. Also include the term and interest rate. Check whether you will face any repayment penalties.
2. Compare different providers. Use the Financing Finder tool to find out which forms of finance suit your plans. And who offers these forms. These are not only banks, but also other business financiers.
3. Ask for price quotations from the financiers you have found. Explain your situation and let them calculate what your new loan will cost.
4. Choose the best option. Pay attention to the cost per month and the total cost. Also take into account the lender's terms and conditions.
5. Take out the new loan if you agree on the costs and terms. The new lender will pay off your old loan(s). From then on, you will pay only to the new lender.

Help with business financing

The Financing Guide will help you find your way around financing options. Do you still have questions? Call the helpline on 088 585 11 11 or ask an expert for advice .

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