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Fees of Danger

When assessing commercial loan costs, the interest rate is often only a drop in the bucket.

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This story appears in the February 2005 issue of Entrepreneur. Subscribe »

After racking up nearly $900,000 on a revolving line of credit to acquire other businesses for his $9 million commercial and industrial fire-protection company, John Lawlor felt burdened by mounting interest costs--the result of using a financing instrument better suited for short-range capital needs. "When everything slowed down because of 9/11 and other impacts to the economy, those acquisitions were not paying for themselves as robustly [as anticipated]," recalls Lawlor, president of Keystone Protection Industries in Montgomeryville, Pennsylvania.

The solution was obvious: Refinance to rein in runaway interest costs. So Lawlor secured a less expensive form of financing--a fixed-rate term loan--for two-thirds of his outstanding debt, and a new line of credit for the rest. "It wasn't additional money being requested," he explains. "It was the same figure that had been approved years before."

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