How to Refinance a Commercial Loan

Step-by-Step Guide

1. 1

   Step 1: Examine your current commercial loan.

   Assess the amount of your payment, the interest you are paying and the number of years you have left on your loan.
   
   Include all commercial loans that you have.
   
   One good reason to refinance is loan consolidation.
2. 2

   Step 2: Consider your reasons for refinancing.

   This will dictate the type of loan you are looking for.
   
   Look for a cash-out refinance loan which will provide you with money to pay for repairs or make a major purchase.
   
   Refinance to a fixed rate loan if your current commercial loan carries an adjustable rate, making cash flow projections difficult on a monthly or quarterly basis.
   
   Do not refinance to another prime-based loan.
   
   Determine if you have a balloon payment due soon.
   
   Unless you have enough cash to make that large payment, you will need to refinance to avoid making the balloon payment at the end of your commercial loan term. , Talk to lenders and compare commercial loans.
   
   Look at payment terms, interest rates and the collateral needed to secure the loan.
   
   Note if the interest rate is fixed or prime-based, and determine if a balloon payment will be due after a certain number of loan years.
   
   Measure these details against your business needs.
   
   Consider fees and costs associated with refinancing.
   
   There might be an application fee, a lender's fee, an appraisal fee and a prepayment penalty which means you will be charged if you refinance again before the loan is paid off.
   
   Make sure refinancing is worth the cost. , You will need tax returns, audits, company financials and possibly your business plan.
   
   Expect the lender to review your business credit.
   
   If you have made late payments or have judgments pending against you, be prepared to explain the circumstances and provide your plan for rectifying any negative credit or financial situations. , If your property has decreased in value since your original loan, you might need additional equity to qualify for a refinance. , You want to be sure that refinancing is valuable to your business financially.
   
   Use a debt calculator tool online, or have your finance team come up with a comparison of your current payments versus your refinanced payments.
   
   This will help you measure the benefits of refinancing. ,
3. 3

   Step 3: Shop around for the best loan.

4. 4

   Step 4: Prepare all of the paperwork required by your lender.

5. 5

   Step 5: Get an appraisal that will reflect the value of the property or product you are refinancing.

6. 6

   Step 6: Do some math to ensure your commercial income will cover the payment of your new loan.

7. 7

   Step 7: Sign the new commercial loan documents.

Detailed Guide

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