Reduce your business loan costs

Interest rates are a big ongoing cost for many businesses. And when the rates on your loans increase, it can impact on your profitability.

If you’ve had a business loan for a while, it might be a good time to look for ways to reduce your loan costs.

Here are some things to consider.

Ask your lender for a better deal

You might assume your loan terms are fixed. But many lenders are happy to renegotiate your interest rates and fees, particularly if you’ve got a solid repayment history.

It’s important to prepare before you ask your lender for a better interest rate. Research similar loan products to see what rates other lenders are offering. Be ready to show evidence of better deals you want your lender to match.

You also need a good understanding of your business finances, including your income, expenses, debts and cash flow. Having this information can help show you’re a reliable borrower that deserves a better rate.

Refinance to another lender

If your current lender won’t renegotiate, you can look at refinancing. This means moving your loan to a new lender with lower rates or better terms.

Do your research to find the best loan for your needs. Comparison websites can be a good start but may not show all the options.

You can look at non-bank lenders as well as banks. These finance companies often have more flexible assessment criteria, but their rates and fees vary. Read the terms and conditions carefully to make sure you understand what you’re signing up for.

As well as interest rates, consider the setup costs and ongoing fees of any new loan. Also check if your current lender will charge an exit fee when you leave. Work out if the interest rate savings will outweigh these costs over time. 

Consult a business loan broker

Comparing the many different loan products available can be confusing. One way to simplify the process is by using a business loan broker.

A good broker will work with you to:

• understand your needs
• compare loans from multiple lenders
• recommend the best one for your situation
• handle most of the paperwork for you

Some brokers charge for their services. Others are free and get a commission from the lender.