Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsBenefits of RefinancingMany benefits may be gained from refi nancing.Some of these are outlined below.A new perspective based on yourcurrent position and not the pastYou may find that a ”fresh start” with a newlender may not carry any of the long-termpre-conceptions which your previous lendermay be influenced by. These may have includedHINTAfter carefully undertakinga cost–benefi t evaluationof refi nancing, you mayfi nd it brings a range ofnew opportunities to yourbusinessa poor trading period in earlier years or a particular experience they have hadwith another customer in your industry, which has influenced their lending decisionmakingagainst your interests.Access to increase in debt financeRefi nancing may also result in increasing the funds available for businessgrowth. You should ensure that, in taking on additional debt, you can stillservice the higher debt commitment and that these funds are utilised to achievea higher return for the business.Consolidation of debt funding – cash flow savingsThere is often an opportunity to combine a number of ad-hoc debt fi nancearrangements into a single product to simplify repayments and to potentiallyreduce your monthly cash fl ow repayment.Restructuring security offeringRefi nancing may also provide the opportunity for a change in the security beingoffered to the new lender. You may fi nd that, over time, the value of securityoffered to the existing lender has increased at a far greater rate than the level ofborrowing. When you negotiate your refi nancing, review what is a reasonableoffer of security assets.TIPRefinancing a strong healthy business may also indicate that there is anopportunity to separate your personal assets from security offered if thevalue of the business assets (i.e. commercial land and building, debtors,fixed assets etc.) is sufficient to cover the borrowing145chapter 7-13 p79-181 Eng.indd 1458/15/11 5:03:06 PM