Business debt refinancing several repayments into one

What is business debt refinancing?

Business debt refinancing means taking out new borrowing to repay what you already owe, usually to reduce the monthly burden, simplify repayments or both. Consolidation is the version where several debts from different lenders are combined into one facility with one payment.

It's common for a growing business to collect borrowing in layers: a short-term loan here, a merchant cash advance there, an overdraft, perhaps a top-up taken before the first was cleared. Each made sense at the time, but together they can mean money leaving the account most days, often at a higher cost than a longer facility would carry.

The British Business Bank explains the trade-off clearly. A longer repayment schedule can reduce the monthly payment and help short-term cash flow even if the rate isn't lower, but you'll pay interest for longer and may repay more overall. A lower rate over the same term can reduce both. We set that comparison out in writing so you can see what you're signing up to.

We are a credit broker, not a lender. We'll look at every facility you have, the settlement figures and your trading, then explore which lenders on our panel may refinance the lot, or the most expensive parts of it. If your business owns vehicles, machinery or property, using them as security can open up longer terms; see asset refinance and commercial property refinance.

Key features

What businesses use it for

• Replacing two or more merchant cash advances
• Clearing stacked short-term loans
• Moving away from daily or weekly repayments
• Turning a hardcore overdraft into a term loan
• Combining several asset finance agreements
• Restructuring after a strong year improves your profile

What changes when you consolidate

Refinancing merchant cash advances and short-term loans

Merchant cash advances and many short-term loans are priced with a fixed fee or factor rate rather than interest that falls as you repay. That matters, because settling early may not save as much as you'd expect, and in some cases the full fee is still payable. Before we recommend anything, we'll ask each provider for a written settlement figure so the comparison is based on real numbers.

Lenders considering a consolidation will look closely at why the existing borrowing was taken. A business that used short-term money to fund growth and now wants a sensible term is a very different case from one borrowing to cover recurring losses. Be ready to explain the story with recent bank statements and up-to-date management figures.

When refinancing isn't the answer

The British Business Bank warns that restructuring debt may not provide enough cash to keep a struggling business going if income is falling. If you're already missing repayments, refinancing on its own rarely fixes the underlying problem and can add cost.

In that situation, free and independent advice is the better first step. Our guide on what happens if you can't repay a business loan explains the options. Business Debtline, a charity run by the Money Advice Trust, offers free advice to the self-employed and small businesses on 0800 197 6026. If the pressure is a tax bill, HMRC may agree a payment plan if it considers it affordable, so contact HMRC early.

What lenders typically look at

• A full list of current borrowing with balances and repayment schedules
• Written settlement figures from each existing lender
• Business bank statements, typically the last six months
• Latest accounts plus current management figures
• Details of any assets or property that could be offered as security
• An explanation of why the existing borrowing was taken