If your business’ financial situation has changed, refinancing a business loan can be a smart way to reduce costs. In many cases, businesses can secure better interest rates or terms when they refinance. However, this isn’t automatically the case.
There are many different factors to consider before refinancing a business loan, and you’ll need to know all the information before making a decision. We’ll cover what you need to know and how to refinance a business loan to optimize your finances.
Table of Contents
- Step 1: Understand Your Goal for Refinancing
- Step 2: Review Your Business’s Finances and Gather Documentation
- Step 3: Consider Your Lending Options to Refinance a Business Loan
- Step 4: Compare Different Business Loan Refinancing Lenders
- Pros and Cons of Business Loan Refinancing
- What Types of Business Loans Can You Refinance?
- Why You Should Consider Refinancing Your Business Loan
- Refinancing vs. Business Debt Consolidation
- Find the Best Terms to Refinance Your Business Loan
Step 1: Understand Your Goal for Refinancing
Ask yourself what you’re aiming to accomplish while refinancing a business loan. Do you want to:
- Lower your monthly payment?
- Lower the cost of your debt?
- Switch to a more suitable payment schedule?
Think of your ideal terms before applying.
For example, perhaps your business’s annual recurring revenue (ARR) has dramatically improved since you got your loan. Refinancing with this improved ARR could significantly reduce your interest rate.
In some situations, you might not be able to refinance your loan, such as if the original terms prohibit it, your business credit score has worsened, or you have missed payments.
Step 2: Review Your Business’s Finances and Gather Documentation
Start by examining your current business debts to understand whether refinancing is possible or beneficial. This includes:
- Current APRs
- Monthly payments
- Credit score
- Bank statements
- Revenue levels
- Operating costs
These are just a few factors that can impact your ability to secure low-interest rates and more favorable terms on a new loan.
Ensure these documents are error-free, as this could impact refinancing your loan. Reviewing these documents can also help you determine your ideal monthly payment and achieve the ideal refinancing terms.
| What Documents Will I Need to Refinance My Business Loan? |
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Step 3: Consider Your Lending Options to Refinance a Business Loan
It’s possible to refinance your business debt via several different tpes of lenders:
- Private Lenders: Private lenders can be especially popular for refinancing business loans. These lenders offer flexible terms, fast funding, and maintain less intensive qualification requirements.
- Banks: Traditional banks are known for offering competitively low loan rates. However, these lenders also have strict borrower requirements and lengthy application processes.
- The Small Business Administration (SBA): The Small Business Administration (SBA) partners with lenders to offer government-backed loans. These loans feature many benefits, including low interest rates and favorable terms, that make them an ideal refinancing option. Unfortunately, these loans can also be difficult to qualify for. And you can’t refinance an SBA loan with another SBA loan.
Some standard loan terms you might want to change when you refinance your current loan include:
- Principal: The loan principal is the capital borrowed and owed, not including interest.
- Interest: Interest is the percentage of the principal added to the monthly payment.
- Collateral: A secured loan is backed by collateral, such as a property, while an unsecured loan isn’t.
Being familiar with these terms will help you understand your options and find the best refinancing options for your situation.
Step 4: Compare Different Business Loan Refinancing Lenders
If you’re going to refinance a business loan, you’ll want to review several different options before selecting the best fit. National Business Capital, a leading private lender, makes it easy to compare numerous financing offers from top B2B lenders.
Simply apply online via a convenient application and upload your documents. From there, you’ll be in touch with an expert Business Finance Advisor who will go over your personalized offers, along with the interest rates and terms. Compare and contrast different options until you choose the best solution according to your business goals.
Pros and Cons of Business Loan Refinancing
Refinancing small business loans can improve cash flow, increase working capital, and even save you capital in the long run from lower interest rates or monthly payments. Still, it’s important to be aware of some potential drawbacks.
| Pros of Refinancing | Cons of Refinancing |
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If you get a lower interest rate, you can save capital on interest and pay off your balance faster — especially if you can pay more than your minimum monthly payment. However, this isn’t a guarantee, and you should speak with your lender about this beforehand to avoid unnecessary fees.
What Types of Business Loans Can You Refinance?
It’s possible to refinance almost any type of business loan. The most common types of refinanced business loans include:
- Business term loans
- Working capital loans
- Equipment loans
- Business lines of credit
- Revenue-based financing
- Equipment lines of credit
- Working capital loans
- Short-term business loans
Let’s explore the main types.
| Type of Financing | Description |
| Business Term Loans | Term loans are provided in a one-time, lump-sum format and repaid over an agreed-upon term. |
| Equipment Loans | Equipment financing breaks down the cost of an equipment purchase over a longer schedule. The borrower reaches an agreement with a lender, who purchases the equipment on behalf of the borrower and collects regular payments until the borrower covers the total cost plus interest. |
| Revenue-Based Financing | Revenue-based financing secures short-term funding in exchange for a percentage of a business’s future sales. Instead of an interest rate, borrowers are given a factor rate, which is multiplied by the funding amount to determine the borrower’s cost of capital. |
| Business Lines of Credit | Business lines of credit offer flexible access to capital on an as-needed basis. Refinancing a business line of credit involves paying off your total balance and opening a new line of credit. |
| Equipment Lines of Credit | Equipment lines of credit help fund heavy machinery and other equipment for businesses. They can be used to purchase, rent, repair, or conduct maintenance for necessary equipment.
Unlike an equipment loan, an equipment line of credit is revolving, so the borrower is given the maximum amount they can owe the lender at any given time. |
| Working Capital Loans | Working capital loans are a type of short-term loan for when businesses need quick access to funds to cover immediate expenses. They’re useful to cover costs like expensive, unexpected office repairs and typically have flexible repayment options. |
| Short-Term Business Loans | Short-term business loans are any type of commercial loan that cover short-term expenses such as hiring costs, inventory purchases, or training resources. |
Unfortunately, refinancing an SBA loan tends to be more complicated. In most cases, it’s only possible to refinance your SBA loan when your lender has either denied new funding solutions or refused to modify your original loan. Even then, in order to refinance, you’ll most likely have to settle for a non-SBA loan.
Why You Should Consider Refinancing Your Business Loan
Refinancing a business loan can bring about many benefits. If you qualify for a better interest rate or repayment schedule, you could improve your bottom line and free up working capital.
Lower Interest Rates
Refinancing may help you obtain lower interest rates that save significant capital over time. This is possible when market rates drop or if your credit score has improved since you originally applied for business financing.
Reduced Monthly Payments
Refinancing entails taking out a new loan to cover the remaining portion of your debt. In other words, the principal of the new loan is usually less than the original – leading to lower monthly payments.
Less Frequent Payments
Refinancing allows you to select the payment terms that work best for your business. In some cases, you may be able to opt for fewer payments – which can improve your cash flow.
Refinancing vs. Business Debt Consolidation
The main difference between refinancing and debt consolidation is the purpose. Refinancing is generally used to get a lower interest rate, whereas debt consolidation centralizes multiple loans under one to simplify repayment.
| Refinancing Business Debt | Consolidating Business Debt |
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Consolidating loans is technically a way of refinancing them. You’re moving outstanding debt under a new facility, which will require a new loan entirely. However, if you’re not strategic, this can lock in a higher interest rate.
Find the Best Terms to Refinance Your Business Loan
Different lenders will likely offer you distinctive terms. Ideally, you’ll want to compare different options for refinancing your business loan. It can be tedious to apply to numerous lenders – unless you’re working with National Business Capital.
National Business Capital is a leading private business lender that can help you find the best refinancing deals. With a single application process, our team will connect you with a multitude of financing solutions for speedy, easy funding.
Apply now to learn more about refinancing your business loan and the new interest rates you could qualify for.
Frequently Asked Questions
Can I Refinance Under My LLC?
Yes, you can generally refinance under an LLC, but this depends on multiple factors. If the original loan is under an LLC, the refinancing process should proceed as normal. If you want to refinance a different loan under an LLC, it depends on your original lender, the type of loan, and the type of business involved in the LLC.
Is Now a Good Time To Refinance My Business Loan?
As of early 2025, economic experts predict a lot of volatility in interest rates. If you can get the refinancing process started now and get a lower rate, then it could benefit your business if rates increase later.
How Much Can You Borrow Against Your Business?
How much you can borrow against your business depends on the loan type, your business’ financial success and your lender’s policies. Typically, these loans can range from several thousand to several million dollars.
How Long Before You Can Refinance a Business Loan?
There’s no set time before you can refinance a business loan unless this is specified within its terms. However, most professionals recommend waiting at least a year before refinancing a business loan.
Does the SBA Allow Refinancing?
Yes, the SBA allows refinancing. You can refinance non-SBA loans with an SBA loan or refinance an existing SBA loan if you meet the required criteria.
Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advice from National Business Capital and the author. Do not rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely on this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there may be errors, omissions, or mistakes.
Joseph Camberato
Joe Camberato is the CEO and Founder of National Business Capital. Beginning in 2007 out of a spare bedroom, Joe and his team have financed $2+ billion through more than 27,000 transactions for businesses nationwide. He’s made it his calling to deliver the educational and financial resources businesses need to thrive.
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