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Refinancing Your Business Loan: All You Need to Know

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If interest rates have gone down since you took out your business loan, you have a higher chance of getting lower rates. And for that, you ought to refinance your existing business loan. But getting a small business loan isn’t easy, and the same goes for refinancing. You’ll need to qualify if you want to refinance with the same lender or get a loan from somewhere else. Read to know more about how to refinance a business loan. 

What does it mean to refinance business loans? 

Refinancing a business loan is the process of applying for a new business loan to pay off your existing debt, either from the same or a different lender. In general, refinancing is intended to save your company money and streamline cash flow. You should ideally attain this goal by refinancing to a loan with more favorable conditions, such as: 

  • Reduced interest rates. 
  • Reduced monthly payments. 
  • A longer time of repayment. 
  • Payments are made less frequently. 

You can refinance your business loan using various funding sources, including bank, online, and SBA loans. But, your ability to refinance the existing debt will be largely determined by the specific business lender, your current loan’s conditions, and your business’s qualities. 

You can, for example, refinance existing debt into an SBA loan if you meet certain eligibility conditions regarding the use of funds, accessible collateral, and current interest rates. Similarly, it is feasible to refinance an existing SBA loan with another SBA loan, but it is uncommon. If your lender refuses to amend the terms of your existing loan or if you require additional money and cannot increase the size of your present SBA loan, you may be eligible to refinance. 

Pros of refinancing a business loan 

Money savings

When you refinance, you may be able to cut your monthly payments and pay less interest altogether. 

Increase cash flow

Obtaining a new loan with a reduced monthly payment amount may alleviate your company’s cash flow strain. 

Improve business credit

If your new lender reports to business credit bureaus, refinancing may allow you to develop a positive payment history on your business credit reports. 

Cons of refinancing a business loan 

Possible problems with qualifying

If you have bad credit or other problems, you might not be able to get a refinance loan. Even if you find a lender who agrees to give you a loan, the new offer might not be as good as the old one to save you money. 

Possible penalties

If your original loan terms included fees for paying it off early, those fees could cancel out any savings you might have made. 

Higher total cost

You might want to refinance your business loan to make the monthly payments more affordable. But if you extend the length of your loan to do this, you may end up paying more in interest over time. 

How to refinance a business loan 

Calculate how much you owe 

Examine your loan balance and interest rate to determine how much you need to borrow to pay off your overall debt. You should also keep track of the length of your loan. When receiving a refinanced business loan, the new loan should have better rates and terms than the existing loan. 

Get the necessary application documents ready 

A lender would request to see proof that your company could repay a new loan. Prepare to provide information such as: 

  • Previous credit history 
  • Business strategy 
  • Your balance sheets 
  • Cash flow estimates and history 
  • Accounts receivable 
  • Collateral 

Shop around and compare lenders 

You might apply for a refinance loan from the same lender or find a new one. Compare loan terms, fees, interest rates, and repayment schedules among lenders to ensure you get the greatest outcomes from refinancing. 

You could try to pre-qualify with lenders who use soft credit pulls, which have no effect on your credit score. But, if the lender performs a hard credit pull when you apply, try to do your rate shopping within a 14- to a 45-day timeframe. If you do this, your applications will most likely count as one query on your credit record. 

The type of financing you get may have an impact on the terms of your refinance loan. A secured loan, for example, would demand collateral but would most likely have a lower interest rate. The interest rate on an unsecured loan may be greater, but you will not be required to provide collateral. 

When you should consider refinancing a business loan 

You’ve better loan qualifications 

If you have a better credit score, more money coming in each year, or have been in business longer, you may be able to get a loan with better rates and terms. If you refinance, you might be able to lower the cost of your business debt. 

Your existing loan is expensive 

Refinancing could be a good idea if your current loan has high-interest rates and payments that cut into your cash flow. Your new loan should have better terms that make it easier for you to pay off your debt and give your business more cash flow. 

You have the potential to save money 

When you first took out your loan, the interest rates may have been higher, but they may have gone down since then. You might be able to save money on your borrowing costs if you can refinance at a better interest rate or turn your variable interest rate into a lower fixed rate. 

When you shouldn’t consider refinancing a business loan 

You find your current loan payments unmanageable 

If you struggle to make your current loan payments, you might be able to talk to your lender about a different payment plan before deciding to refinance. If you opt to refinance, keep in mind that increasing the loan term implies paying more interest (and more overall) throughout the life of the loan, even if you can secure a better interest rate and payment term. 

You won’t actually save money 

If you refinance a business loan, you might not save money. When you refinance a loan, you may have to pay new loan fees, such as origination fees and closing costs. If you pay off your loan early, your current lender may charge you a fee. This could wipe out any savings you might get from refinancing. Also, if your business’s qualifications haven’t changed, refinancing might not be able to lower your interest rate or payment amount. 

Refinancing vs. Business debt consolidation 

How you handle your business debt will depend on your financial goals. If you’re trying to decide between refinancing and consolidating your debt, knowing how the two are different can help. Both are loans, but debt consolidation replaces multiple loans with one loan from a single lender.  

Refinancing and consolidating debt are both good ways to pay off debt. But if you want to get rid of the high cost of a single business loan, you can’t do debt consolidation. Here’s a quick comparison of refinancing and debt consolidation. 

Refinancing Debt consolidation 
  • Pays off an existing loan. 
  • Swaps out one loan for another. 
  • Regular, fixed payment. 
  • May change your interest rate, monthly payment, and the length of time of payback. 
  • Pays off at least two loans. 
  • Consolidates several loans into one loan. 
  • Regular, fixed payment. 
  • May change your interest rate, monthly payment, and the length of time of payback. 

refinance a business loan | Refinance with Way.com 


Most of the time, the best business loan is the one with the lowest interest rates and feasible terms. But other things, like how quickly you need the money and how qualified your business is, can help you decide which option to go with. You should compare your different options before finalizing refinancing a business loan. 


How long before you can refinance a business loan? 

The period you must wait before refinancing a company loan is mostly determined by your lender and the type of financing. However, if you’re considering refinancing, it’s advantageous to do so if you can demonstrate to a lender a higher credit score or more income, as well as a consistent history of repayment on your existing loan. 

Does the SBA allow refinancing? 

In certain conditions, the SBA will enable refinancing. If your lender refuses to amend the terms of your existing SBA loan, or if increasing the amount of your present loan is not possible, you may be able to refinance your SBA loan with another SBA loan. If, on the other hand, you wish to refinance another sort of company loan with an SBA loan, you’ll need to meet certain requirements, such as how you’ll use the proceeds, collateral, and interest rates, among others. 

Can you do a cash-out refinance on a business? 

For some commercial real estate loans, it may be possible to refinance and get cash out. With cash-out refinancing, you get a new loan that is different from the one you already have on your property. Then, you use this new loan to pay off your old loan, and the difference is given to you in cash. This money is often used to make improvements to a home, make repairs, or invest in other businesses. 

When do lenders allow a business loan to be refinanced? 

Depending on the lender and the type of loan, a lender’s willingness to refinance a company loan varies. To demonstrate your dependability, some lenders could need you to have a specific number of timely payments made on your previous loan. 

Stuck with a bad auto loan? It’s your cue to try refinancing. With Way.com, you get the best refinance options available to you. Use our refinance loan calculator, compare the loan rates, prequalify, and save up to $1850 a year on your refinanced auto loan. 

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