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Fees of Danger

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

By Crystal Detamore-Rodman • May 5, 2006 Originally published Feb 2, 2005

Opinions expressed by Entrepreneur contributors are their own.

After racking up nearly $900,000 on a revolving line of creditto acquire other businesses for his $9 million commercial andindustrial fire-protection company, John Lawlor felt burdened bymounting interest costs--the result of using a financing instrumentbetter suited for short-range capital needs. "When everythingslowed down because of 9/11 and other impacts to the economy, thoseacquisitions were not paying for themselves as robustly [asanticipated]," recalls Lawlor, president of Keystone ProtectionIndustries in Montgomeryville, Pennsylvania.

The solution was obvious: Refinance to rein in runaway interestcosts. So Lawlor secured a less expensive form of financing--afixed-rate term loan--for two-thirds of his outstanding debt, and anew line of credit for the rest. "It wasn't additionalmoney being requested," he explains. "It was the samefigure that had been approved years before."

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