Debt refinancing usually happens in a declining interest rate environment. When you refinance your debt, you take out a new loan – usually a larger loan – at a lower interest rate to pay off an existing loan. This allows you to take advantage of the lower interest rate and reduces your interest expense. Taking out a larger loan gives you extra cash to invest in your business.
If you have multiple loans, you can pay them all off by taking out a large loan. By consolidating all your loans, you’re left with only one loan payment, which can make financial management much easier. Also, you can save a lot on interest expenses if the new loan has a lower interest rate than all of your existing loans.