When the business owner wants to refinance

At present, interest rates are at least at a low level, and due to the current credit crunch, it is difficult for business owners to obtain commercial loans to expand, purchase equipment or integrate commercial debt.

Another option is for companies to refinance their existing personal home mortgages or to try to obtain a home equity line of credit.

Before a business owner applies for a mortgage or commission, it is wise to meet with an accountant to determine their needs and focus on the following factors:

• What is used to make money?
• Does it bring extra cash flow?
• When do you need money?
• Assess loan type - traditional or FHA
• Loan maturity assessment
• Tax impact
• Cost-benefit analysis

In some cases, a business may need a new truck and hope to refinance the owner's personal cash flow to get a better interest rate. Due to the purchase of trucks, the new mortgage principal may result in a larger loan, but due to lower interest rates, the payment is the same.

The problem in this case is whether increasing the length and principle of the mortgage makes sense to purchase a truck that may only have a five-year life, while generating additional closing costs.

Financing may be the last resort for an urgent need to expand or improve the purpose to keep the business active, but the business owner does not need all the funds immediately. In this case, does refinancing make sense and idle funds before needed? No, the home equity line of credit is more meaningful because business owners can use it when they need it.

There are many scenarios that can happen. The basic promise is that business owners must assess the situation and seek help from an independent third party without emotional attachment.

Many banks and mortgage companies will tell you what you want to hear just to make money, and of course make money.

Therefore, it is important to introduce some expertise, such as your accountant having more transactions in financing arrangements and understanding of your business and personal finances.

The current economy makes it more challenging to refinance, but planning ahead can not only help business owners make the right decisions, but also help them get better deals.

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