Advertiser Disclosure

How To Refinance a Business Loan

Written by Banks Editorial Team
5 min. read
Written by Banks Editorial Team
5 min. read

Sponsored By

The first business loan you take out may not be the one you stay with forever. It’s common for business owners and consumers to refinance their loans for several reasons. Refinancing your loan provides more flexibility. Some people do it to make the loan more manageable, while others do it to get out of debt sooner. If you want to refinance a business loan, there are a few things you should know.

National Business Capital - Business Loans
SBA, Term and Working Capital Loans to grow your Business. Fast Funding with Affordable Rates if you need immediate Working Capital. Get a dedicated Business Finance Advisor.

What Happens When You Refinance a Business Loan?

When you refinance a business loan, you swap your old loan with a new term. Everything about it changes. The interest rate, number of years on the loan, and principal can all change. While a small business owner must make do with the current interest rate, they can tweak other parts of the loan term, such as the number of years and principal. These modifications impact the monthly payments, the main objective of most business loan refinances.

Are There Business Loans More Suited to Refinance?

Refinancing your loan is an important decision, and it’s more about your loan’s current terms than the type of loan. A refinance can make sense regardless of whether you have an SBA loan or a startup loan. However, business owners should focus more on their goals for the refinance than on the actual loan. You can get any loan refinanced, but it only makes sense to go through with this process if the refinance will help your business.

What are the Benefits When You Refinance a Business Loan?

Wondering if a business loan refinance makes sense for you? Here are some of the common advantages business owners look for during a refinance.

Lower Interest Rates

Interest rates influence your monthly payment, and securing a lower rate with a refinance can make the monthly payments more manageable. Interest rates can decline while you hold onto the loan, and your business credit score can also improve. Both of these factors can help you secure a lower rate on your loan if you get a refinance. 

More Favorable Terms

Some business owners take out loans with small payments at the beginning that grow over time. Other business owners may have taken out a balloon loan and can’t make the ballooned payment at the loan’s maturity. If you got stuck with one of these loans, a refinance could give you better terms. You can turn the remaining principal on your balloon loan or simile financial product into a more favorable installment loan. 

Lower Monthly Payments

A business loan refinance can minimize your monthly payments, freeing up more of your cash flow. Even if interest rates didn’t go down, you could still reduce monthly payments by extending your loan’s duration. Through a refinance, you can turn a 10-year loan into a 15-year loan and spread the principal over 180 months instead of 120 months, making it possible to save hundreds of dollars each month.

Get Extra Cash

Some business owners need extra cash but don’t want to take out a second loan. Instead, these business owners can add more principal to their existing loan and take out cash equal to the difference. For example, you can turn a $30,000 small business loan into a $50,000 loan and pocket the $20,000 difference. Then, business owners can use those funds to cover any expenses or make investments in their companies.

National Business Capital - Business Loans
SBA, Term and Working Capital Loans to grow your Business. Fast Funding with Affordable Rates if you need immediate Working Capital. Get a dedicated Business Finance Advisor.

Are There Any Drawbacks to Refinancing?

Most financial products have drawbacks, even the best ones. Knowing the potential downsides will help you make a more educated decision and take the course of action that’s right for you. Here are some disadvantages to consider before getting your business loan refinanced.

  • A loan refinance can get expensive: Refinancing isn’t free. It can get expensive to get a new loan because of the administrative fees, attorney fees, and closing costs. For small loan amounts, a refinance may not be worth the effort or cost.
  • You might increase your monthly payment: A higher interest rate will increase your loan’s monthly payment. Most people do loan refinances to get lower rates, but if you need something like a cash-out refinance, you may get stuck with a higher interest rate. Reducing the number of years on your loan can get you out of debt sooner, but you will have to pay more each month on your loan.
  • Refinancing takes a lot of time: Business owners aren’t shy of investing a lot of time into their companies and seeking a positive return. Refinancing your loan can help with cash flow, but you should consider the time commitment before getting started. You will have to gather the right paperwork and shop around for the right lender.

How to Refinance Business Loans

After considering the pros and cons, some small business owners will still want to refinance their loans. Here are a few things to keep in mind to ensure a successful loan refinance that helps your business.

Know Your Business Goals

A loan is a useful asset that can help you achieve business goals that feel out of reach. However, asking for too much money or rushing into an unnecessary refinance can hurt your company. Know what you want for your company and how refinancing your loan can help, if at all.

Review Your Business Financial Health

Consider why you want a refinance. The answer for most people centers around monthly payments. You can lower your loan payments by adding more years to your loan or getting a lower interest rate. However, if you frequently get refinances to address thin profit margins, a loan refinance may not be sufficient. A loan refinance can give you time, but business owners have to address structural issues to be sustainable.

Prepare the Requirements

Each lender has different requirements, but there is some overlap. You will have to gather basic documents such as the following:

  • Employer Identification Number (EIN)
  • Social Security Number (SSN)
  • Personal and business tax returns
  • Bank account statements
  • Financial statements

Check with your lender about the requirements before applying for a loan.

Compare and Contrast Your Refinance Options

Business owners can increase the length of the loan to minimize monthly payments, get a lump sum cash-out, get a better interest rate, or shorten the loan’s term to get out of debt sooner. Business owners seeking refinancing should consider those options before reaching out to lenders.

Shop Around for Business Loan Refinancing Lenders

If you’re getting a refinance, this means you already have an existing loan, but you don’t have to go with the same lender. However, you might find a better interest rate and terms if you shop around and see what other lenders are offering. Also, your business credit score may have improved since your first loan application, and a higher score can give you better financing options.

Is a Refinance Business Loan Right for You?

A loan refinance can make sense if you find an opportunity to lower costs. A lower interest rate makes sense for any business owner, but you have to consider if you will break even after the closing costs and other expenses. You can also extend a loan to minimize monthly payments, which can strengthen cash flow. Refinancing your loan doesn’t make as much sense if the costs would exceed the benefit or if you have a short-term loan.

Want to Refinance Your Business Loan

Refinancing your business loan has many advantages, and business owners can get creative with how they refinance. You can get a lump sum of cash, minimize monthly payments, or get out of debt sooner. If you want a refinance, National Business Capital can help.

National Business Capital is a lending platform that connects small business owners with lenders. Business owners can use National Business Capital to access these financial products:

  • Small Business Loans: Get a lump sum and make monthly payments on the principal.
  • Business Lines of Credit: Only pay interest when you borrow against the line of credit. You can pay it back anytime.
  • SBA Loans: These loans have the longest wait times, but if you get one of these loans, they have some of the best interest rates and terms available. 

You can visit National Business Capital’s website to learn more about their loans and start a simple online application. Submitting the application will not impact your credit score.

National Business Capital - Business Loans
SBA, Term and Working Capital Loans to grow your Business. Fast Funding with Affordable Rates if you need immediate Working Capital. Get a dedicated Business Finance Advisor.

You may also like

When you get a small business loan, the interest rates makes a big difference. Discover how fixed rate and variable rate loans work.
Read more

Advertisement Disclosure

Product name, logo, brands, and other trademarks featured or referred to within are the property of their respective trademark holders. This site may be compensated through third party advertisers. The offers that may appear on’s website are from companies from which may receive compensation. This compensation may influence the selection, appearance, and order of appearance of the offers listed on the website. However, this compensation also facilitates the provision by of certain services to you at no charge. The website does not include all financial services companies or all of their available product and service offerings.