Why now is the right time to refinance your commercial loans

By Ronnie Evans

There’s no doubt that falling oil prices have had a big impact on the workboat industry. As the industry has slowed, so too has the need to invest in new barges and boats. But just because you’re not in the market to fund your new build program doesn’t mean that now is the time to ignore your existing fleet’s investment.

In fact, in many cases, now is the perfect time to take a closer look at your existing loan portfolio. It’s a good idea for all companies with commercial loans to take stock of those loans on a regular basis, and there’s no better time than when business has slowed and interest rates are still at historic lows.

Refinancing your existing commercial loan portfolio can help cut monthly expenses, consolidate debt, and save money. Here are a few reasons why now might be a good time to consider refinancing your existing loan(s):

  • Competitive loan market. There is a lot of capital ready to be deployed in today’s market, and many banks are offering very competitive interest rates and terms. Refinancing now can allow you to extend your current amortization, which in turn increases the balloon and, combined with low interest rates, can significantly lower your payment.
  • Low interest rates. The last time the Federal Reserve raised interest rates was in 2006. Recent Fed conversations have signaled that a rate increase is imminent; it is just a matter of when. Refinancing now will lock in today’s low interest rates and help reduce your company’s risk against the likelihood of rising rates.
  • Loan Sources. Rather than just going to the source that funded your existing loans, consider involving multiple sources to bid and you should find the package that best fits your company’s needs.
  • Savings can cover pre-payment charges. Most loans come with a pre-payment charge, but with today’s low rates, typically the savings you gain from refinancing will offset the cost of the pre-payment charges.
  • Conserve cash. The money saved on lower monthly loan payments can be re-invested in the company or can help cover the cost of capital expenses while day rates have been compressed and business has slowed.

Regardless of whether you are in the early stages of your loan, have a balloon payment coming due, or you just haven’t taken a close look at your exisiting loan portfolio in a while, now is a good time to evaluate your options and make sure you’re getting the best possible value from the money you have borrowed.

Ronnie Evans is Director of Marine Finance at Key Equipment Finance the equipment finance affiliate of KeyBank. He has more than 20 years of experience in the finance industry. He can be reached at ronald_evans@key.com.

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