Definition
To refinance is to replace an existing loan with a new one, usually from a different lender or on different terms. Businesses refinance to lower costs, change repayment frequency, release equity, consolidate several debts or move from short-term to longer-term finance. Whether it is worth doing depends on comparing the new loan's total cost with the payout figure and remaining cost of the old one.
Refinancing is how a business swaps finance that no longer fits for finance that does.
Common reasons
- Replacing expensive short-term loans with a cheaper, longer facility.
- Moving from a non-bank lender to a bank once the business’s position improves.
- Consolidating several debts into one repayment.
- Releasing property equity for business use.
The comparison
Get written payout figures for existing loans and compare what you would pay keeping them with the total cost of the new loan over the same period. Include break costs, discharge fees and the new loan’s establishment fees. Run each current debt through the early payout savings calculator.
Watch the term
Stretching the term eases each repayment yet adds to the overall bill. Our business debt consolidation review covers the trade-offs. To explore a refinance, make one enquiry.
Common questions
When is refinancing worth it?
When switching costs less overall once every fee and exit charge is counted, or when the fresh structure fixes a cash flow squeeze that justifies the extra expense.
Does refinancing affect my credit file?
Applying for the new loan creates a credit enquiry. Closing old loans that were paid as agreed is generally neutral or positive.
Sources and further reading