How Small Businesses Can Refinance Their Debt

When your business is in trouble, it's understandable that you'd do just about anything to save it. However, as things improve, you could be doing your business a disservice by not refinancing your high-interest debt and replacing it with a more reasonably-priced source of capital. That's why small business debt refinancing could be the best option for some entrepreneurs.

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3 Things to Do Before Applying for a Small Business Loan

3 Things to Do Before Applying for a Small Business Loan

No matter what kind of business you own or plan on starting, one thing’s for sure: you’re going to need capital. Thankfully the advent of the Internet and with it an influx of alternative lenders, entrepreneurs now have greater access to the funds they need to grow. However, before you go looking to get a loan for your business, there a few things you will need to consider.

Here are three items you absolutely must do before applying for a small business loan.

Make sure your personal credit scores are as good as they can be

One thing that many entrepreneurs fail to realize when applying for a small business loan is that their personal credit scores and history will likely be taken into account before a final decision is reached. Because of this it is imperative that you do everything you can to bring your credit scores up. Doing so will not only improve your chances for approval but will also affect the interest rate you’re ultimately able to secure.  Unfortunately this is rarely a quick process but there are a few ways to get started.

The first thing you should do is find out what your credit looks like. A good and free option is Credit Karma (you can read Dyer News contributor Kyle Burbank’s review of the site here). Although the site only offers scores from two of the three credit bureaus and may not show the exact scores that creditors will see, it will still give you a ballpark idea of where you stand. Additionally Credit Karma will likely suggest areas of improvement by pointing out what your biggest strengths and weakness are and how those factor into your scores.  

Another important step is to ensure that everything on your report is correct. Credit Karma will have some of this info but you may also want to visit AnnualCreditReport.com, which allows you do download credit reports from all three bureaus for free once a year. If you do find any errors be sure to file a dispute with the bureau reporting it. This will hopefully get offending items removed and, with any luck, bring up your scores.

Research your options and ensure you qualify

There’s good news and bad news when it comes to looking for a small business loan these days. What’s great is that there are now more options than ever, ranging from SBA loans and traditional banks to online lenders such as Lending Club, Kabbage, and  Able Lending. The potential downside is that you may not meet every lender’s criteria. For example, while some may lend to startups just looking to get off the ground, other loans may be limited to businesses who have been around for a few years. 

It’s important to pay attention to these details when doing your research so you don’t waste your time applying for a loan you surely won’t get. With that said, you will still want to look at multiple options to ensure you’re getting the best rate possible. You might also find it helpful to make a list of lenders in order of preference so you can start at the top and work your way down in case you are declined.

Determine what you can afford and have a repayment plan

This final note is actually the most important: don’t take out a loan if you don’t have a way to repay it. Getting in over your head with debt is no way to run a business and could end up collapsing the whole thing. What’s more, defaulting on your small business loan will likely hurt your personal credit as well.

Some items to watch out for when applying for a loan include extra costs such as origination fees or prepayment penalties that could cause you to spend more than you realize. Also pay close attention to your interest rate as well as your APY (annual percentage yield) in order to understand how much your loan is really costing you. Then, once you’ve determined what your monthly payments will be, make sure that you can afford it even in a worse case scenario. Obviously unforeseen circumstances do come up and so you don’t want to leave yourself or your business vulnerable financially.


If your business is in need of capital, applying for a small business loan may be the best thing you can do. That said the process shouldn’t be taken lightly and will require some research and planning on your part. Only after you’ve gotten your personal credit scores in order, done your homework on what lenders are looking for, and mapped out how you’ll repay the loan, will you truly be ready to apply for your small business loan.

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Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

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