Banks and lenders are vital to your business – and your business is vital to theirs.
Over the time that your business has changed and grown, you may have taken on loans from many different institutions, including credit cards, overdrafts and merchant or trade facilities. You may have a commercial property loan on the books, such as to finance an office block or warehouse, and your business may be servicing debts at differing interest rates and terms. Some may offer lines of credit and redraw facilities while others may not.
One way to reduce your overall debt and gain control over your business finance is to refinance and/or consolidate your loans.
Get a letter of facilities
Beginning the process is easy.
All you have to do is ask your banks or lenders for a letter of facilities. A letter of facilities details all the debts or financial instruments your business uses through that bank. These might be:
- Credit or charge cards
- Electronic banking or BPAY
- Property loans or chattel mortgages
- Lease, trade, or merchant’s facilities
- Cheque cashing facilities
- Lines of credit
The letter should also detail what, if any, termination fees are involved with paying out a loan early.
A basic guide to finding the best refinancing deal
When you were looking for your original business loan package, you likely looked for the smallest interest rate. This is good common sense, but not all interest rates are created equal. Some banks fix the rates of their loans while others are variable. A fixed rate might look good amid record lows but you are taking a higher risk if rates go down again.
You should look at as many financiers and banks as possible to see if you can get a better deal. What that loan might look like is dependent on your business; you may want more flexible repayment terms or to expand your business into bigger premises. You may need to adjust the amount of equity in your loan to accommodate the changes. You should have a list of requirements and expectations (in writing) so prospective lenders can help you reach your goals.
Will your current bank come to the party?
Using your list, you can enter into negotiations with your current bank or lender. Will they accept your new terms while keeping your service levels intact? If the answer is no, you are free to take your business elsewhere. If they accept, try to lock in the package for at least one to three years.
Before making any major financial decisions, you should consult a financial professional.