SBA Loan Refinancing

Optimize Your Finances

Did you know that there are numerous benefits that can come with a SBA loan refinancing? Especially for small business owners looking to optimize their cash flow, this can be a prudent next step on the journey of your company’s financial health. Let’s dive into what you need to know about SBA loan refinancing–from tax deductibility to some actionable steps to get started.

If you’re ready to optimize your loan terms, save costs wherever possible, and free up even more liquid capital, refinancing your SBA 7a loan could be the right move. Contact our professional team to go over your options–and experience for yourself the fiscal agility that comes with having a trusted financial advisor in your corner. 

Are Business Loan Refinancing Costs Tax-Deductible?

Fortunately for the savvy business owner looking to refinance their SBA loan, the associated costs (post-refinancing) are, in fact, tax-deductible–though it should be noted that the original loan is not tax-deductible.

Although paying off the original loan with funds from a second loan doesn’t qualify as a business expense, interest payments on the new loan become tax-deductible once repayment begins. Take advantage of opportunities to reduce costs and optimize your financial position with strategic loan refinancing. Save money in the long run while maximizing tax deductions with us at Cornerstone Capital Advisors–where we help you finance your goals, one step at a time. Schedule a consultation with us today and discover the upper hand dealt by Cornerstone–bringing your that much closer to living your dream!

Can You Use Your SBA Loan to Refinance Debt?

In short, yes, you can refinance debt using your SBA loan–however, you must meet certain criteria in order to qualify. In order to be eligible, an SBA loan holder must embody the following characteristics:

• They must be a small business based within the United States
• They must be a for-profit business
• They must have exhausted all other financing options
• They must have invested equity
• They must have a credit score of at least 690
• They must offer up a down payment of at least 10%
• If applicable, they must have paid any franchisees before releasing loan funds
• They must not have any current federal debt
• They must not have a criminal history, or must be able to explain any misdemeanors 
• They must not have had any bankruptcies in the last three years

Business Loan for Consolidation: Pros and Cons of SBA Loan Refinancing

Are you considering consolidating your business loans? SBA loan refinancing could be the solution you’ve been seeking. However, it’s crucial to weigh the pros and cons before making a decision. Let’s delve into the advantages and disadvantages of this financial strategy to help you make an informed choice.

Pros

1. Lower monthly payments: One of the primary advantages of SBA loan refinancing is the potential for lower monthly payments. By renegotiating your loan terms, you can extend the repayment period, resulting in reduced monthly financial obligations. This can significantly ease the strain on your cash flow, providing greater flexibility to allocate funds to other areas of your business.

2. Lower interest rates: Refinancing your business loan through the Small Business Administration (SBA) offers the opportunity to secure lower interest rates. With the SBA’s backing, lenders are more inclined to offer competitive rates, enabling you to save on interest expenses over the life of the loan. Lower interest rates mean more of your payments go towards paying down the principal, accelerating your path to debt-free operations.

3. Increased funding opportunity: SBA loan refinancing can also provide access to increased funding opportunities. By consolidating multiple loans into a single SBA-backed loan, you may qualify for a higher loan amount, providing the capital needed to fuel growth initiatives, expand operations, or address immediate financial needs.

4. Boosted liquid cash flow: Refinancing your business loan can result in boosted liquid cash flow, offering greater financial stability and resilience. With lower monthly payments and reduced interest rates, you’ll have more cash on hand to cover operational expenses, invest in new projects, or weather unforeseen economic challenges. Enhanced liquidity can enhance your ability to seize opportunities and navigate fluctuations in the business landscape.

Cons

1. Better rates may not be available:  While the prospect of lower interest rates is enticing, it’s important to recognize that better rates may not always be available through SBA loan refinancing. Your eligibility for favorable terms depends on various factors, including your creditworthiness, business financials, and market conditions. If you don’t meet the lender’s criteria for preferred rates, refinancing may not result in significant cost savings.

2. Longer terms may not equate to savings: Extending the repayment term through SBA loan refinancing can lead to lower monthly payments, but it may not necessarily equate to long-term savings. While spreading out payments over a longer period can provide immediate relief, it also means paying more in interest over time. Before committing to a longer loan term, carefully assess the total cost of borrowing to ensure it aligns with your financial goals.

3. There may be possible financial penalties for the current loan: Before refinancing your business loan, consider any potential financial penalties associated with your current loan. Some lenders impose prepayment penalties or fees for early repayment, which could offset the benefits of refinancing. Evaluate the terms of your existing loan agreement and calculate the costs involved in paying off the loan prematurely to determine if refinancing is financially viable.

Types of Business Loans That Can Be Refinanced

Refinancing your business loans can be a strategic move to optimize your financial position and unlock savings. Whether you’re looking to lower monthly payments, secure better terms, or access increased funding, understanding the types of business loans that can be refinanced is essential. Let’s explore five common types of business loans that are prime candidates for refinancing:

1. Commercial Real Estate Loans

Commercial real estate loans are used to finance the purchase, renovation, or construction of commercial properties. Refinancing a commercial real estate loan can be advantageous if you’re looking to lower interest rates, extend the repayment term, or tap into equity accumulated in the property. By refinancing, you can reduce monthly mortgage payments, improve cash flow, and free up capital for other business initiatives.

2. Working Capital Loans

Working capital loans provide businesses with the necessary funds to cover day-to-day operational expenses, manage cash flow fluctuations, and seize growth opportunities. Refinancing a working capital loan can help lower interest rates, consolidate multiple loans into a single manageable payment, or extend the repayment period to ease financial strain. With improved cash flow and reduced borrowing costs, you can better position your business for long-term success.

3. Equipment Loans

Equipment loans are specifically designed to finance the purchase or lease of equipment essential to your business operations. Refinancing an equipment loan can result in lower monthly payments, reduced interest rates, or improved loan terms. Additionally, refinancing allows you to upgrade outdated equipment, consolidate debt from multiple equipment loans, and preserve capital for other business needs. By leveraging the equity in your equipment, you can enhance efficiency, productivity, and competitiveness.

4. Term Loans

Term loans provide businesses with a lump sum of capital that is repaid over a fixed term with regular payments. Refinancing a term loan offers the opportunity to secure better interest rates, extend the repayment period, or adjust the loan terms to better align with your business goals. Whether you’re looking to lower monthly payments, consolidate debt, or access additional funds, refinancing a term loan can provide the flexibility and savings you need to thrive.

5. Microloans

Microloans are small, short-term loans typically used by startups and small businesses to cover initial expenses, purchase inventory, or bridge temporary cash flow gaps. Refinancing a microloan can be beneficial if you’re looking to lower interest rates, extend the repayment term, or increase the loan amount. By refinancing, you can improve affordability, reduce financial strain, and position your business for sustainable growth.

How to Refinance Your SBA Loan

Refinancing your SBA loan can offer significant benefits for your business, including lower monthly payments, reduced interest rates, and improved financial flexibility. By opting for SBA loan refinancing, you can streamline your business capital flow and position your company for long-term success. With strategic planning and execution, refinancing your SBA loan can be a valuable tool for optimizing your business’s financial health and achieving your growth objectives. Here are the five primary steps to consider when uncovering how to refinance your SBA loan:

1. Understand How Much You Owe

The first step in refinancing your SBA loan is to understand the current terms of your loan and how much you owe. Gather all relevant loan documents, including the original loan agreement, statements, and payment history. Review the outstanding balance, interest rate, repayment term, and any associated fees or penalties. Having a clear understanding of your current loan obligations will help you determine if refinancing is the right decision for your business.

2. Determine Goals and Benchmarks

Before proceeding with refinancing, clearly define your goals and benchmarks for the process. Are you looking to lower monthly payments, reduce interest rates, consolidate debt, or access additional funds? Establishing specific objectives will guide your refinancing strategy and help you evaluate potential lenders and loan options effectively. Consider factors such as desired loan terms, repayment schedule, and overall financial objectives when setting your refinancing goals.

3. See If You Qualify

Next, assess your eligibility for refinancing by reviewing the requirements set forth by potential lenders. Factors such as credit score, business financials, cash flow, and collateral may impact your eligibility for refinancing. Additionally, consider any specific criteria outlined by the SBA for refinancing SBA loans. Determine if you meet the necessary qualifications before proceeding further with the refinancing process.

4. Find the Best Lender for Your Goals

Once you’ve determined your eligibility, research and compare lenders to find the best fit for your refinancing goals. Look for lenders that specialize in SBA loan refinancing and have a track record of success working with businesses similar to yours. Consider factors such as interest rates, loan terms, fees, reputation, and customer service when evaluating potential lenders. Choose a lender that offers competitive rates and terms aligned with your refinancing objectives.

5. Consolidate Paperwork, Apply, and Connect With an Expert

Gather all necessary paperwork and documentation required for the refinancing application process. This may include financial statements, tax returns, business plans, and legal documents. Streamline the application process by consolidating paperwork and ensuring all information is accurate and up-to-date. Consider seeking assistance from a financial advisor or SBA loan expert to navigate the refinancing process effectively.

Once you’ve compiled the necessary documentation, submit your refinancing application to the selected lender. Be prepared to provide additional information or documentation as requested during the underwriting process. Stay proactive and responsive throughout the application process to expedite approval and funding.

Seamless SBA Loan Refinancing with Cornerstone Capital Advisors

Refinancing your business loans can be a strategic financial move to improve cash flow, reduce borrowing costs, and achieve your business objectives. Whether you’re seeking to refinance commercial real estate loans, working capital loans, equipment loans, term loans, or microloans, understanding your options is key to maximizing the benefits of refinancing. By evaluating the terms of your existing loans and exploring refinancing opportunities, you can optimize your financial flexibility and set your business on a path to success.

Take back control of your business finances with the experienced team at Cornerstone Capital. We benefit when you succeed–so why not connect with our team today? Discuss your options with us now to secure your rates at 954-434-1296 and discover the Cornerstone advantage.