Three Things Businesses Need To Consider When Refinancing

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Three Things Businesses Need To Consider When Refinancing

Refinancing essentially acts as a catalyst for expansion and change in a business. It  is an opportunity to re-evaluate the requirements of your business and to get access to the required funding to achieve your goals.

It is very easy to get caught in a damaging funding arrangement. The circumstances seem ok when you sign the contract initially, but then things start to change. If you are undertaking a new project or a longer repayment time scale, you will need to secure extra capital. And in this scenario you are often unable to negotiate on the terms and conditions of your current agreement.

Any entrepreneur caught in such a financial situation will find it difficult to navigate free of the issue. Early exit penalties, limiting terms and conditions and high buyout fees further complicate the situation. It does not take much to figure out that such a scenario is bad for just about any business.

Many a time to extricate themselves from their current mess business owners prefer to take on more debt, which will ultimately prove to be restrictive rather than beneficial. If you are stuck in a similar situation consider it to be a warning sign. Such an outlook will always restrict the growth/expansion of your business. In many cases debt can be construed as a sign of growth as it provides a much required influx of capital that will allow an organisation to expand further.

What Should Your Approach To Refinancing Be Like?

1. Be Bold

Despite the risks involved, you will find that boldness has often rewarded entrepreneurs in the past from a refinancing perspective. Therefore, it is worth giving this a serious amount of thought. It is an opportunity to consolidate all your business’s debts in one place, create greater working capital and thrash out new terms and conditions on your current financial contract, for example, the requirement of personal guarantees.

Like with most other aspects of running a business, taking the first step is often the hardest. And it is a decision that you should make after giving a fair amount of thought. Consider it as an opportunity to gain back control over your business’s financial future. Choose providers that give due consideration to your business’s current needs.

Be ready with a sound business plan and exhibit how you expect to generate enough revenue to support and sustain your vision. If your consider refinancing as the best option for the next stage of your business’s expansion, then be ballsy and approach finance companies that will be flexible, hands on and able to provide you with a quick influx of capital.

2. Be Yourself

The life of every small business owner is turbo charged. Funny how the contradiction works out isn’t it? You could be presented with a life changing new project or deal that could potentially elevate the company to the next level, but find yourself short of the required funds to fulfil it. Then you approach your usual lenders for the required capital injection and are faced with an exhaustingly long eight month approval process, that could in all possibility end in a flat “no, thank you!”

Refinancing will permit you to enter into financial agreement with a provider who will allow for changes and review the terms of your contract based on your business’s current requirements. By steering clear of institutional money, you shine the spotlight on the validity of your business ideals rather than restricting it to a set of tick-boxes. Now, you are able to conduct constructive discussions about seeking extra capital to fund for your growth or while renegotiating the terms and conditions of your current payment terms.

3. Consider Alternative Options

When thinking about refinancing it is very important to evaluate all the options available to you. The continued evolution of technology has driven advancements in hitherto non-technology related fields like banking, retail, news, healthcare and travel.

Development of new technology in the field of alternative finance can change the landscape of business borrowing for good. Access to the necessary capital will become simpler and easier. Don’t always assume that your nearest high street bank is the only solution available to your business. Always evaluate which type of financial lender will offer you the most flexibility regardless of whether you are looking for invoice finance, asset funding or a loan from the bank.

4. Be In Control Of Your Financial Future

SMEs form the backbone of the UK economy, but many small business owners are hampered by restricting financial contracts that ultimately force their businesses to go bust. However, today business owners have a lot more options to take advantage off when seeking extra working capital. This means the importance of finding the right fit for your business’s financial needs has never been greater.

Clare Louise

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