Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsHow Refinancing Works?Refi nancing involves taking a new debt facility where the new funds are used topay out your old debt facility. This is all done by the new lender. If the refi nancinginvolves an increase in debt, then additional funds would be available to drawon.The key reasons why you choose to refi nance may include:• Gaining a better interest rate from a different lender or from a different mix ofdebt products;• Switching to fi xed rates or back to variable rates;• Gaining more fl exible features in a facility to meet your business needs;• Increasing your overall borrowing with a new debt facility;• Changing the fi nancial cash fl ow commitment required to fund debt (e.g. fullydrawn advance to an overdraft);• Consolidating debts to minimise and simplify repayments; and• Releasing security over personal / specific assets as the business reaches alevel of continued profitability.TIPMake a list of the reasons why you might consider refi nancing your loan tocompare against the loan offer you receive144chapter 7-13 p79-181 Eng.indd 1448/15/11 5:03:06 PM