Business Owner Switches To Fixed Rate To Avoid Market Volatility

By Rose Brown
Content writer
Last update: 9 December 20221 minute read
Business Owner Switches To Fixed Rate To Avoid Market Volatility

How switching from a variable to fixed rate loan agreement helped one business make smarter decisions about growth

As recent years have demonstrated, global events can heavily impact the economy. For businesses who have credit with a lender, the variability of their agreement can cause problems whenever interest rates rise. For a recent Rangewell client who wanted to eliminate uncertainty and have a more growth-focused future, refinancing to a fixed rate was the only real option.

Table of Contents

Refinancing allows a lender to switch from one loan to another, provided the lender agrees to take on your existing debt and offer new terms. For many businesses, refinancing is a flexible option mainly useful for changing loan types – such as switching from a short-term bridging loan to a longer-term commercial mortgage. 

However, refinancing can also help you switch the actual terms of your loan product from a variable rate influenced by interest rate changes to a fixed rate, where the amount you’ll repay is fixed for a particular duration known as the loan term. 

For many businesses, a fixed rate may first appear the more expensive option as the rate can be higher than a variable one. However, in a recent client’s experience, the long-term savings and security offered by a fixed rate were far more valuable than any potential variable agreement could offer. 

The client was coming to the end of their business loan and wanted to secure a fixed-rate offer from lenders. Rather than approaching any directly, they came to our team for help… 

Why was there a problem?

The client had been repaying their original commercial loan for a number of years, but recent changes in the market saw uncertainty around interest rates and led to a series of fluctuating repayments. This made it difficult for the client to forecast cash flow and business growth accurately. 

The client knew about refinancing but did not know how to get started, so they needed a broker who could help them identify the appropriate lenders, explain the financial products offered and even negotiate on their behalf. They wanted to the security of a fixed rate and the expertise of a finance team on their side. 

Additionally, the client wanted to understand how a fixed rate would impact them versus a variable one, so needed to see offers across three, five and seven years to help make the right decision. 

Why we were able to help

Rangewell knows the entire lender’s market, and in this case, we were more than happy to oblige the client’s request to secure a number of offers from challenger and mainstream banks. However, the best offer came from the client’s existing loan provider – an option they had never even considered themselves. 

After securing offers for different term lengths and from multiple lenders, we then talked through the client’s plans for their business and helped guide them to the best decision that suited their growth plans. 

In their case, the client wanted a fixed rate across the longest offered term, which was seven years. They chose their existing loan provider to refinance with as it meant less complexity and a sense of familiarity. 

Often, clients don’t know if their existing lender offers refinancing or other products that may be more suitable for them. It can take an external broker team like Rangewell to get involved, as we can have conversations with specialists in your lender’s team and identify opportunities not obvious to existing customers.

Ultimately, our client was able to refinance with their existing lender to a seven-year fixed rate, granting them full visibility over their finances. Rangewell was able to add further value by negotiating a lower interest rate. 

Refinance to a fixed rate

Given recent market volatility and interest rate changes, a fixed rate can be a sensible choice and an even more affordable option. Refinancing your existing loan product into a fixed rate one requires negotiation with lenders who expect to see evidence of strong business performance to offer good terms. 

To find the right lender and secure the best offer, you’ll need an expert on your side. Here at Rangewell, we can help you by negotiating refinancing agreements that help meet your business goals, but also convince lenders of your performance and therefore improve your overall offer. 

If you’re currently in a variable rate agreement and want to switch to a fixed one, get started with refinancing by speaking to our team today. 

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