Reviews of Banks and Lenders for Business Debt Refinancing

Refinancing business debt can be a smart financial move for companies looking to improve their cash flow or get better loan terms. By consolidating multiple debts into one new loan with a lower interest rate, businesses can potentially save thousands of dollars in interest payments each month. However, not all banks and lenders are created equal when it comes to business debt refinancing. This article reviews some of the top options to consider for refinancing commercial loans.

Small Business Administration (SBA) Loans

One of the best sources of financing for small businesses is the SBA’s 7(a) loan program. These government-guaranteed loans are issued by approved lenders and meant for general business purposes, including refinancing debt. The max loan amount is $5 million and the average interest rate is 6-8%.

The main benefits of SBA loans are low down payments, flexible terms up to 10 years for working capital and 25 years for real estate, and the fact that the government guarantees a portion of the loan to the lender. This makes it easier to qualify if you have imperfect credit or a newer business. I’d recommend checking local banks and credit unions first for SBA loans, as they tend to have the lowest rates and fees. Some top national SBA lenders include Fundera, Lendio, and LendingTree.

Online Lenders

Online business lenders like Funding Circle, OnDeck, and LendingClub offer a faster, more streamlined way to get financing. These companies use technology to automate the application and approval process, often depositing funds within a week of applying.

Loan amounts range from $5,000 to over $500,000 with terms from 6 months to 5 years typically. Rates are higher than SBA loans, usually 10-30% APR, but underwriting is also less strict. This makes online lenders a solid option for debt consolidation if you have lower revenues or credit scores. I’d compare rates across multiple sites to find the best offer.

Banks and Credit Unions

For well-established businesses with strong credit, traditional banks and credit unions can provide low rate loans and lines of credit for refinancing. Rates are often prime + 0-3%, putting them in the 6-10% range currently. Terms vary from 1-7 years for a term loan or revolving credit for lines of credit.

The downside is the lengthy application and waiting periods, with funding taking 1-3 months in many cases. Lending requirements are also stricter in terms of personal credit scores, collateral, and years in business. But for qualified borrowers, banks offer some of the cheapest sources of capital. I recommend developing relationships with bankers at your local branches to see what options they can provide.

Some top national banks for small business loans include Bank of America, Wells Fargo, and JP Morgan Chase. Local and regional banks can also have very competitive rates and more flexibility than national chains.

Alternative and Specialty Lenders

There are also a wide range of more specialized financing companies that cater to certain industries, business types, and situations. For instance, Kabbage provides loans up to $250,000 that can be approved in minutes based on business data. This makes them ideal for quick financing and applicants with shorter credit histories.

Credibly specializes in debt consolidation loans up to $1 million with same day funding available. They work with newer businesses and can refinance into one monthly payment. Other alternative lenders like Currency Capital and National Funding offer various loan products that may work for debt restructuring.

I’d recommend researching lenders that focus on your industry, location, or situation to find the best fit. Having multiple options will allow you to compare and negotiate the ideal terms and rate for refinancing your business debts.

What to Look for When Comparing Lenders

When reviewing banks and lenders for refinancing, there are several key factors to consider beyond just interest rates:

• Loan amounts and terms – Make sure the lender offers enough capital and flexible repayment terms to meet your needs.
• Time to funding – Online lenders are fastest while big banks are slowest, which impacts how quickly you get access to capital.
• Qualifying requirements – Each lender will have its own minimum credit score, time in business, and revenue expectations.
• Fees and closing costs – These can vary greatly and significantly impact the true cost of the loan.
• Prepayment penalties – Some lenders charge fees if you pay off the balance early.
• Customer service reputation – Look for responsiveness, transparency and helpfulness.
• Industry experience – Specialized lenders often provide better guidance and structuring.

Taking the time to weigh each of these factors will help you identify the most affordable and suitable financing for your business goals. Be sure to get multiple quotes before making any final decisions.

Pros and Cons of Refinancing Business Debt

Refinancing commercial loans or debts can yield many benefits if done strategically:

Pros

• Lower interest rate saves money each month
• Consolidate multiple debts into one payment
• Improve cash flow with lower monthly payments
• Access better loan terms like longer maturity
• Tap into equity to get working capital
• Deduct interest costs on taxes
• Build business credit history

However, there are also some potential downsides to weigh:

Cons

• Closing costs and prepayment fees
• Risk of higher total interest costs over loan lifetime
• Temptation to over-borrow against equity
• Difficulty qualifying with lenders due to credit or collateral
• Disrupting banking relationships by refinancing
• Locked into fixed loan terms

Being aware of these pros and cons will allow you to make an informed decision about the prudence of refinancing any existing commercial debts your business currently has.

Tips for Qualifying and Finding the Best Terms

Here are some tips to boost your chances of approval and get the best rates when applying for business debt refinancing:

• Have 2 years of solid revenue history and financial statements
• Maintain low credit card balances and high business credit scores
• Be able to provide 25-50% equity if using commercial real estate
• Have strong personal credit scores over 720
• Show consistent growth in profits and cash flow
• Prepare a business plan and loan proposal package
• Get quotes from multiple lenders to compare offers
• Offer collateral and a down payment to reduce risk
• Ask lenders about premiums for shorter maturities or fixed rates

Taking steps to improve your business financial profile and shop around with various banks and lenders will help secure ideal loan terms for consolidating and refinancing existing commercial debt.

When Does Refinancing Business Debt Make Sense?

In general, refinancing business loans or debts tends to make the most financial sense under certain situations:

• When interest rates have dropped significantly since obtaining original financing
• If business cash flow has improved enough to qualify for better loan terms
• To get out of adjustable rate loans before rates rise higher
• When there’s an opportunity to consolidate multiple debts into one
• If prior financing was meant to be temporary or bridge financing
• When original loan terms were unfavorable due to poor credit or collateral

Having a clear purpose like lowering monthly payments, tapping equity, or getting out of adjustable rate debt can help justify the costs and hassle of refinancing.

Businesses should run the numbers to see if potential savings exceed any fees that come with replacing existing financing. Reducing high interest rate debts generally yields the most benefit.

Closing Thoughts

Refinancing business debt can be a double-edged sword – providing an opportunity to improve cash flow but also risking higher costs if done hastily or unnecessarily. By carefully reviewing different lenders, terms, and your specific goals, you can determine if consolidating debts could benefit your company. Be sure to compare multiple offers and run projections to see that any refinancing makes prudent financial sense.

With some diligent research and number crunching, refinancing business loans or debts could unlock extra working capital and provide more stability. But pursue this path strategically, not just for the sake of obtaining new financing. The right refinancing can be a lifeline while the wrong one could sink your company.