Is your business struggling to make enough money just to cover monthly expenses? An obvious but reliable business investment tip is to quickly identify the reasons why your business is underperforming, so you can prevent hemorrhaging more money.
After all, the quicker you know the problem, the faster you can make adjustments to save your business.
But unfortunately, we often need to reinvest large sums of money to carry out these adjustments. So, what do you do if you don’t currently have a large sum of money at your disposal?
Well, you may be surprised to hear that the key to getting quick cash for your business lies in refinancing your housing loan! Before we discuss how to go about refinancing, let us explore what refinancing means in terms of business investment.
How Does Refinancing for Business Investment Work
Some people may not realise that they can tap into their home’s equity when they need a little extra cash. This method allows you to “take cash out of your home”, and it is known as cash-out refinancing.
Since your property’s value will increase over time, you can withdraw part of the built-up equity in exchange for a bigger loan. While this method of freeing up cash does increase your total loan amount, you get access to additional cash flow without losing ownership of your asset.
For example, you bought your home in 2010 for RM200,000. Fast forward to 2022, you still owe the bank RM150,000. But a property valuation reveals that your home has increased its value by 50%, raising it to RM300,000. This is when you can apply for cash-out refinancing.
|Gross Cash Out||RM90,000|
In this scenario, you are eligible to take out a loan amounting to RM240,000 as the standard loan-to-value ratio (LTV) is 80% of your property’s value. After deducting the RM150,000 outstanding amount owed to the first mortgage, you get a total of RM90,000 that you can cash out to meet your business investment needs.
Just imagine the difference it would make when you invest an extra RM90,000 into your business. How many more months of salary payment would you be able to give your staff? How many more effective marketing campaigns could you run? Wouldn’t your sales increase significantly as a result?
Ways to Invest in Your Business
Some people need quick cash to expand their restaurant or store’s location because it can no longer accommodate the growing number of customers. Perhaps they also need it to cover employees’ salaries, rent, or utility bills.
Some business owners simply need immediate cash to finance the repairs or refurbishment of their offices. Regardless of the reason, refinancing your mortgage can provide a reliable solution if you do not have enough cash at hand.
Here is a case study of how we helped our clients with their rejected cash-out refinancing loan applications for business investment.
Miss Tay and Mr. Lee were looking to acquire RM250,000 within a month for a business investment. However, due to Miss Tay not having any credit cards or loans, her loan application was rejected. Mr. Lee’s application was also rejected as he was several months behind in his credit card and mortgage payments. Both applicants had fluctuating incomes and could not produce proof of income.
We helped Miss Tay and Mr. Lee refinance their mortgage successfully and acquired almost double their initial expected amount.
|Interest rate||3.55% per annum|
|Repayment tenure||288 months (24 years)|
Read the full client story on our website.
Now that we have covered the basics, let us discuss how to go about refinancing your mortgage. Here are 5 important things to consider when refinancing for business investment purposes.
5 Steps to Consider Before Refinancing for Business Investment
1. Evaluate Your Existing Commitments
The first step is to calculate all your existing commitments. If you have multiple mortgage loans, it makes sense to pay off some of your debts first before you think about reinvesting into your business or expanding it.
2. Schedule a Property Valuation
How much is your property worth now? The market in your area might be vastly different from the time you bought your property. Figuring out if your home’s value has appreciated or depreciated is essential if you want to refinance it.
The best way to do so is to schedule a property valuation. If the market is depreciating, the last thing you should do is refinance your home to fund your business, as it will only lead to losses. It is not worth risking your company and the roof over your head to further business goals.
Similarly, it is also worth noting that refinancing is not an ideal option for you if you have just bought your home. It takes time for your property to appreciate in value or build up enough equity, besides your down payment, to warrant a cashout.
3. Get a Loan Proposal
It is easier to persuade banks to approve your loan application if you have a well-documented loan proposal. Be sure to state your refinance plan and how much you need to borrow.
A major part of the loan proposal is your business plan, which should include everything from an overview of your business to your production plan. The goal is to prove that your business is capable and ready to turn a profit. Other details such as client testimonials and supporting market research can also boost your proposal’s credibility.
4. Find a Suitable Bank
It goes without saying that choosing a trustworthy bank is important for your decision to refinance. Do ample research for this step and look beyond your current banks. A reliable bank will advise you on the best strategy to refinance your business investments.
Keep in mind that favourable interest rates are not the only things you should consider. You have to ensure the bank you choose is a reputable one and has a proven track record of helping fund business ventures such as yours.
5. Get a Time Schedule for Your Cash Flow
Finally, you need to know when you will be receiving the cash. Also important is taking steps to determine your business cash flow. How much money will your upgraded business generate each month? Will it cover all your expenses and the new mortgage?
If you are unsure about the answers to these questions, you might need to reassess your situation. After all, it will definitely serve you to eliminate risks and ensure the best outcome. Especially since your business and home are on the line.
Refinancing your home can be a quick and rewarding way to acquire much-needed cash for your business. However, it can also be a risky option if not done correctly. Apart from that, it could be challenging to get your mortgage refinancing application approved. If rejected, you would need to wait up to 6 months before you get a chance to resubmit your application.
How Can BlueBricks Help?
As experts in handling loan rejections, BlueBricks is aware of all the common reasons for rejected applications: low bank valuation, income documentation issues, and credit report issues. BlueBricks’ professional consultants can help you overcome challenges like these so you can get your mortgage refinancing application approved and safely invest in your business.
Loan Consultancy Service
BlueBricks has helped numerous clients out of their desperate financial situations and led them towards achieving their personal and business goals. It is one of the leading loan agency companies in Malaysia, in terms of loan approval rates.
BlueBricks consultants will take great measures to understand your situation before devising a customised loan solution for you. Clients will be well-informed about the process and requirements and be guided at every step.
Loan Rejected Service
BlueBricks’ loan rejected service can help ensure your loan application meets all the necessary criteria. They can identify the reasons behind failed applications and execute adjustments for resubmission. BlueBricks will utilise all strategies until your needs are met, and your application gets the final stamp of approval.
Need proof? See how BlueBricks successfully helped a client refinance her mortgage and escape a desperate financial situation involving loan sharks.
Explore our refinancing housing loan rejected services and discover how BlueBricks can help you achieve your business goals.
Business Investment Refinancing FAQ
1. Can you refinance with a different bank when pursuing cash for business investment?
Yes. Many people refinance with a different bank for various reasons like better interest rates or easier loan approvals.
2. What is the top benefit of cash-out refinance when seeking money for business investment?
Cash-out refinancing is the only loan that allows you to stretch your repayment period up to 35 years. As a result, your monthly repayment amount would be significantly lower compared to a business loan with a 9-year repayment period. Besides that, being able to borrow a large sum of money at low interest rates is also an attractive benefit.
3. How long does a cash-out refinance for a business investment take?
It is possible to receive the cash from a mortgage refinancing loan within 2 months. However, as a licenced moneylender, BlueBricks can provide urgent cash to customers within 14-30 days.