Refinancing business debt: when it makes sense

Why businesses refinance

Growing businesses often accumulate several facilities: a merchant cash advance, a short-term loan and some asset finance. Refinancing into a single, longer facility can reduce monthly outgoings and simplify administration.

Look at total cost, not just monthly payment

Extending the term usually lowers payments but can increase the total interest paid. Compare both figures, and include early settlement charges on existing agreements.

Good reasons to refinance

• Trading has improved since the original borrowing
• Short-term debt is being used for long-term purposes
• Multiple repayments are straining cash flow
• An asset has risen in value and can support cheaper secured borrowing

When to pause

If refinancing is needed simply to cover losses, address the underlying trading problem first. New debt rarely fixes a structural shortfall.

Gather the facts

List every facility with its balance, rate, term and settlement figure before you speak to a lender or broker.