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Can You Refinance a Business Loan to Pay Down Debt?

January 30, 2023

Business loans are critical for building and expanding your company. They can cover ongoing expenses or necessary investments during growth. However, companies often experience difficulties with unfavorable loan terms from their original lender.

If you are asking yourself, “Can you refinance a business loan to pay down debt?” the answer is yes. If you’re ready to find a better banking partner for your lending needs, consider choosing Texas Gulf Bank to refinance your commercial loans.

Learn when you should consider refinancing your debts, the benefits refinancing can provide, and what sets Texas Gulf Bank apart from other lenders. 

Is It Time to Refinance Business Debts? 

To know if refinancing is the right decision for your business, you should review all current debts to assess two key factors: your current interest rate on existing loans and the existing loan terms.

Interest rates: New businesses are typically offered higher interest rates and less favorable terms since their loans represent a higher risk to lenders.

Refinancing is a smart choice if your business was initially given a higher interest rate because of your newness as an entity. But, if you have developed a solid business history, good credit score, and stable revenue, you may qualify for lower interest rates.

Not everyone will qualify for a better rate, so it’s important to compare your initial rates against current market rates to determine whether this is a good reason to consider refinancing business debt.

Existing loan terms: Refinancing a business loan also makes sense if your current loan terms are unfavorable and make it difficult to make a dent in your principal loan amount.

For example, your current business loan might have a large balloon payment coming due soon, high loan fees, or penalties for early repayment of existing loans. It makes sense to refinance the loan if the rate, fees, and terms of a new loan are more favorable than the existing loan (including the prepayment penalty you would incur to refinance).

Existing bank loans from another bank might make it difficult for your business to have the funding access needed for future expansions or investments, which can stunt your company’s long-term growth. Your current bank lender might not be willing to loan your business more funds, which may hinder future success.

If your business loans are saddled with high-interest rates or challenging loan terms, it may be time to consolidate your debts into a more cost-effective and favorable business loan with Texas Gulf Bank. 

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The Benefits of Loan Refinancing 

The two most significant advantages of refinancing existing business loans is the ability to consolidate debts into a larger loan to spread out costs and possibly qualifying for more beneficial loan terms. Refinancing offers a wealth of other benefits, which may include:

  • Lower monthly payments
  • Reduced loan fees
  • Higher loan limits
  • Avoiding large balloon payments
  • Strengthened business credit
  • Increased cash flow
  • Improved banking relationship

When making smaller monthly payments, your company can reallocate funds to cover other critical expenses or working capital expenditures, significantly improving your cash flow.

Also, your company may gain a more favorable loan term that does not penalize your business for early repayments or may offer lower loan processing fees and costs. In addition, many companies benefit from eliminating the stress and concern of an upcoming balloon payment by refinancing their debts.

When your business has a refinanced loan with more beneficial loan terms, it puts your company in a better position to fully repay all business debts much sooner. The result is a substantial boost to your company’s credit scores and purchasing power. 

How to Apply for Business Loan Refinancing 

Texas Gulf Bank is proud to partner with businesses of all industries to provide reliable and strategic lending solutions, including business loan refinancing. TGB offers loan refinancing options for existing loans including:

Note that Texas Gulf Bank can refinance business loans currently with other banks or financial institutions if they meet the underwriting and policy parameters of TGB. In these instances, Texas Gulf Bank will be in the first lien position before any other creditors.

To begin the loan refinancing application process, potential borrowers must complete an initial refinancing assessment, including submitting critical financial records. The required documentation includes, but is not limited to:

  • Completed loan application
  • 3 years of business and personal tax returns
  • Current personal financial statement
  • Current business balance sheets
  • Current income statements
  • A detailed list of existing debts, including balances and loan terms
  • Property surveys and rent rolls for commercial real estate loans

Potential borrowers that qualify for loan refinancing and provide us required documentation may experience a fast, in-house application review and prompt funding if approved. 

Discover A Better Lending Experience with Texas Gulf Bank 

With 100+ years of experience serving businesses across the Gulf Coast region, Texas Gulf Bank offers a full range of efficient and strategic lending solutions coupled with exceptional service. We focus on building a complete business relationship and becoming a partner in your success – not just closing a single transaction.

– Are you ready to refinance a business loan and start a better banking relationship? Contact our team of loan officers at Texas Gulf Bank to discuss business loan refinancing options and discover the Texas Gulf Bank difference.

– Do you have other business loan questions besides, “Can you refinance a business loan?” Subscribe to our email newsletter to learn more about loan refinancing options through our bank. We provide regular news and updates about our commercial lending options and business services. Sign up today to begin receiving valuable information directly in your inbox!