My Business Loan is Maturing, What Do I Need to Do?

Rates over the past couple of years have been on a steady increase. If you currently have a commercial loan with a financial institution, you might be wondering about the future of your loan. As your loan matures, here are some topics that you can discuss with your lender.  

What's the difference between loan term and loan amortization? The term of your loan is when it hits maturity and is time to have the rate adjusted. The amortization is what the monthly payment is based on. Usually, a commercial loan will have a 3- or 5-year term with a payment that is spread out over a longer period, for example, 20 years. 

When does my loan mature? Loan maturity signifies the date your term is up with your current rate. If you still have debt to pay off, you will need to renew the loan term. If you don't know your current loan maturity, reach out to your lender. 

What do you anticipate my rate will increase to? Your lender should be able to give you an estimate on what your rate and payment will be based on the current amortization of your loan upon maturity. 

What are my options for different terms? You have the option to choose a term as low as one year or up to five years. Check with your lender to see what will work best for you and your business.  

Am I smart to lock in longer or shorter terms? Each business is different. Consult your lender as he/she is the professional in this area and can guide you to what is best.  

Can I re-amortize my loan to keep my payment reasonable? And should I? In most cases, you can look to restructure your loan to make sure the payments are reasonable for your cash flow needs. Whether or not you should do this is dependent upon your business and the type of collateral.

Does the collateral securing my loan make a difference when making these decisions? Yes, if your loan is secured with real estate, you could look to extend the amortization to decrease your loan payment. You wouldn't want to do this unless it is necessary for your cash flow because of the increased rates. Loans secured with equipment will be harder to re-amortize as equipment tends to depreciate on a faster timeline. Remember to ask about your options.   

Should I shop my rate? Not necessarily.  All banks are facing the same rate issues. However, if you have loans with a financial institution where you don't feel comfortable reaching out to your lender to discuss these options or don't even know who your lender is, then you will want to reach out to a bank you trust.  

Should I do a line of credit to help with cash flow if my payments increase? This is an option to discuss when you sit down with your lender to go over your financial situation and prepare for the upcoming maturity and inevitable rate increase.  

Where do I start? Call your local Security Financial Bank lender and schedule an appointment. We will be more than happy to discuss any loans maturing with us or if you have loans maturing elsewhere, let us take a look to see how we can help.  Business Banking | Security Financial Bank (sfbank.com)