Hello all!
I took out a business loan in 2018 of $1.5M, which was 5.5%. The balance is around $450K, so the interest is 11% as of today. I reached out to our lender, and they are willing to shave off .25%, which is nothing, and option two is to lower the payment by adding an additional ten years. So, interest will accumulate. The payment will go in half or even lower. I will carry a long-term debt. But I can make a larger payment toward the principal and free up some cash flow when I have large sums of money. Business is doing well, and I can make the current payment with no problem, but watching so much cash flow going towards interest and payment is not sitting well with me. Also, my debt ratio is good; unfortunately, SBA products are hard to convert to traditional loans. So basically, my bank is saying hey, look, there is a way to lower your payment, but you will pay more interest when all is set and done. I told them I might sell the business one day before the date and could walk away with the asking price and valuation.
I really don’t know what to do. I can make monthly payments with no problem, but it’s just insane to watch 11% toward interest. If I take the lower payment road and let them review my statement, etc., I can free up some cash.
So, I’m just looking at amort calc online.
My current payment is around $10k. Like you said, this doesn’t change my rate problem. It just lowers my payment, and I must focus on tackling the principle in huge chunks. I don’t want to get comfortable and just let it ride the new term and keep making monthly payments. I really want to get this done and pay them off. I have five years left on it. With new terms, it will drop to $5,500 or lower. If the Fed decides to roll back on the hikes in 2024-2026, the loan rate might decrease to 7-9, but that’s if. But I can use an extra 60-70K which will free up my cashflow. Which I could literally use to pay the principle or hire a new person.
Interest rates can also go up. In the last inflation cycle they thought they had it beat and lowered rates but they ended up going even higher.