Refinancing Existing Business Debt in Your Personal Name

Refinancing existing business debt that is in your personal name comes with many benefits, such as transferring the risk of carrying such business debt under your personal credit. Keep in mind that if you have personally signed for a business loan and your business goes bad, you may stand to lose all of your personal assets – most likely your house.  For all start up business financing and business debt financing, it is better to take personal risk out of the equation.

Refinancing business debt entails converting original debt, including outstanding or overdue amounts, into a new debt instrument. There are many reasons businesses choose to refinance. Refinancing can convert a short-term loan into longer-term debt, which can help your small business improve its cash flow and provide more available working capital. In addition, paying off creditors enhances the reputation of your business, reduces the possibility of litigation, and helps re-establish solid relationships between the business and its important vendors. Many small businesses choose to refinance to consolidate business debt, paying off its current debt obligations with new financing. 

One important advantage to refinancing personal debt used for the business with business financing, is to reduce risk. Keep in mind that most financial experts would urge you to personally guarantee a business loan only as a last resort. Having a personal loan which is used for the business means you are personally liable for that debt. Refinancing such debt with business financing means you are hedging risk by getting rid of that personal liability. 

However, there are certain factors to keep in mind. Certain types of loans contain penalty clauses when the loan is repaid early. There are also often closing and transaction fees typically associated with refinancing. We can help you with questions about transferring debt form your name into your business name.