Why might a business choose to refinance its loans?

A business might choose to refinance its loans primarily to replace an existing loan with better terms. Refinancing can lead to significant financial advantages, such as lower interest rates, reduced monthly payments, or improved loan conditions that align more closely with the company’s current financial situation or goals. For instance, securing a loan with a lower interest rate can lead to substantial savings over time, making it easier for the business to manage its cash flow and reduce overall debt expenses.

Refinancing can also provide the opportunity to adjust the loan duration or switch from a variable interest rate to a fixed one, adding more predictability to future financial planning. By obtaining better terms, a business can improve its financial stability and take proactive steps toward growth and investment opportunities.