Think HBR

Why now is the time to refinance your business loan

Piggy Bank
Sean Gillard
The finance landscape is awash with market disruptors, from Fintechs (financial technology) to government inquiries and new regulatory requirements. To date, most of these changes have focused on the consumer, residential and investment side of the industry. But there may be a hidden bonus for businesses as lenders move to rebalance and refocus their loan books.
It's fair to say that Australia's 2 million-plus small businesses should have an opportunity to access better banking arrangements as part of this process. Why? Lenders need to keep and grow their business lending.
Now might be the perfect time to undertake your own disruption by calling for a better finance structure for your business. We know that any business can simply walk in and request a better deal and in this case, the question should be just that…may I have a better deal?
The result might well be a token gesture, like a small fee waiver or a 10-basis point rate cut. Job done.
However, there is more to be gained by asking a few questions of your own business, before approaching the lender. So, here are my tips for getting the best deal for your finance arrangements in the current climate.
● Know what your finance requirements are. Understanding the exact nature and timing of your lending requirements is imperative in getting the best structure and deal from your lender. There's no point paying for features that don't apply to your situation.
● Know what your finance structure is. Do you have a basic business loan that's charged the base index rate? Do you know why you are being charged a monthly or quarterly administration fee on top of your interest rate? For example, there's no sense in having long term funding requirements placed in short term or revolving credit facilities, like overdrafts.
● Know your own financial performance. Understanding the mechanics of your profit and loss, and balance sheet is essential. There is no point in asking for a better deal unless your reports are up to date and, importantly, you understand what’s in them. You also need to know how they impact on your ability to meet your commitments.
● Understand how the lender assesses your risk profile.
Banks aren't likely to throw out the welcome mat if you or the business has poor credit. Or if you can't articulate the direction or performance of the business. Putting together a comprehensive snapshot along with your up-to-date financial reports is a must. Be prepared before you enter a discussion around how the lender assesses your risk, which in turn sets the price you're offered.
At the moment the finance landscape is working in your favour. Seize the opportunity and the peace of mind that comes from knowing you've got the best possible finance arrangement for your business.
For further information contact DKF Crosbie on (02) 4923 4000, email or visit
Sean Gillard2 Sean Gillard
Is a Partner at Crosbie Finance. He has 17 years experience in finance and a vast network of industry contacts. He offers one of the most extensive arrays of lenders and products in the industry, covering business, investment, home, equipment and Self Managed Super Fund loans.