Business loan refinance: a fresh start for your funding

What is a business loan refinance?

Refinancing a business loan means replacing existing debt with a new facility. The old loan or loans are paid out, and the business repays the new lender instead. That sounds simple, and often it is, but the best results come from knowing exactly what you want the new arrangement to do.

Some owners want breathing room each month. Others want to pull several repayments into one, release equity, or move on from a lender who has stopped being helpful. Each goal points to a different structure.

Why do businesses refinance?

• Several facilities with different due dates are hard to track
• Repayments are squeezing day-to-day cash flow
• A fixed term or interest-only period is ending
• The business has grown and needs a facility that fits its size
• A lender has tightened its approach and is no longer supportive
• A tax debt or overdue creditor needs clearing (see business loans to clear ATO debt)
• Equity has built up in property that could fund growth

What kinds of debt can be refinanced?

Existing debt	Refinance idea
Term loan	Move to a longer or more flexible term
Equipment finance	Combine with other debts or release equity
Overdraft	Replace with a more stable facility
Credit cards and trade accounts	Consolidate into one repayment
Director loans	Restructure alongside business debt
Tax liabilities	Pay out and spread repayments

Where the debts are tied to commercial property, see commercial loan refinance.

What do lenders look at in a refinance?

Lenders compare the new request with how the business has really performed. Typical focus areas:

• Recent financial statements and tax lodgements
• Conduct on existing loans, including any missed repayments
• The security and its value
• The purpose of any extra funds
• The industry and how steady its income is
• Directors’ personal positions

A clean ATO position helps. If there is a tax debt, being open about it early generally goes better than having it surface late.

How does Ownright approach a refinance?

Our approach is practical. We begin with your current loan documents and listen to what is frustrating you. Trevor Scott has more than 40 years in finance and has seen refinance requests of every size and shape. Where mainstream lenders see a problem, we look for lenders who see a solution.

We arrange refinances Australia-wide from our Knoxfield base, for sole traders, partnerships, companies and trusts. If you want to see whether a refinance is worth exploring, send us your situation and we will take a look.

Are there risks in refinancing?

Yes, and it pays to be clear-eyed about them:

• Exit costs on the old loan can erode the benefit
• A longer term can mean paying more over time even if repayments drop
• Rolling short-term debts into a long-term loan can extend a problem
• Security may be tied up for longer
• A new lender may have different covenants or reporting requirements

These are not reasons to avoid refinancing, just reasons to check the numbers. The guide on short-term vs long-term business loans is a good companion read.

Secured or unsecured refinance?

If the existing debt is unsecured, moving to a secured facility may open more options, but it puts an asset on the line. Staying unsecured can limit lender choice. Our pages on secured business loans and working capital loans explain how the structures differ.

An illustrative example

Imagine a small manufacturer with an equipment loan, an overdraft and two credit cards, all with different repayment dates. Cash flow is tight each month. A broker could look at whether a single facility secured against the owner’s property would simplify repayments and free working capital, provided the exit costs are sensible. This is illustrative only, and the outcome would depend on the lender and the numbers.

What if the bank declined my refinance?

A decline from one lender is information, not a verdict. Different lenders look at different things, and a business that does not fit a bank’s template may fit another lender’s. We explain how that can work on our page for business loans with bad credit and in the guide on how to refinance when your bank says no.

How do you compare the old loan with the new one?

A refinance only makes sense if the whole package improves, not just one line. Before committing, it helps to put both loans side by side on matters that go beyond the monthly repayment.

Question	Old loan	New loan
What exit costs apply to leaving?	Check the contract	Not applicable
What are the establishment and ongoing costs?	Known	Ask for them in writing
How long is the term and what is the repayment pattern?	Remaining term	New term
What security is held?	Existing	May change
Are there guarantees or covenants?	Existing	May be different
Does the lender report or review annually?	Existing	New obligations possible

Asking for the same information for both loans on one page makes the trade-offs visible. Fees are described here in general terms only, because every facility is priced on the individual circumstances.

Which debts are worth refinancing first?

When there are several debts, it often makes sense to start with the ones doing the most damage:

1. Short-term, high-pressure debts such as merchant cash advances, expired overdrafts and overdue trade accounts
2. Tax debts that are growing or attracting enforcement action
3. Loans with balloon payments approaching
4. Equipment finance that no longer matches how the equipment is used
5. Long-term loans that are fine and may be best left alone

Rolling everything together is not always smart. A well-priced, well-structured long-term loan may be worth keeping while the short-term problems are cleared.

What is a director guarantee and why does it matter?

In many company loans the directors give personal guarantees. In a refinance this matters, because the new lender may ask for the same guarantees or different ones, and because moving the debt changes what is at risk if the business struggles. Some refinances reduce personal exposure; others increase it by adding property security. Knowing the guarantee position on both the old and new loans is part of any honest comparison.

How does security show up on the PPSR?

For equipment and other personal property, lenders register their interest on the Personal Property Securities Register, the public register of security interests. When a loan is refinanced, the old registration should be discharged and the new one recorded. Leaving an old registration in place can cause problems when you try to sell the asset or raise further finance. It is a small administrative step that is easy to overlook.

Mistakes to avoid

• Refinancing without reading the exit terms on the old loan
• Focusing only on the lower repayment instead of the whole picture
• Applying to many lenders on your own, leaving multiple enquiries
• Using short-term money to solve a long-term problem
• Leaving out debts or tax issues, which tends to surface later
• Waiting until a fixed term ends and options narrow

What documents should I have ready?

• Current loan statements and contracts
• Recent profit and loss and balance sheet
• Tax returns and BAS lodgements
• Details of security and its approximate value
• ID for directors and guarantors
• A list of all debts, including credit cards and ATO balances

The business loan documents checklist covers what lenders usually ask for.

Which situations suit which type of refinance?

Situation	Direction often explored	Related page
Several facilities with clashing due dates	Consolidation	Secured business loans
Growing ATO debt	Pay out and restructure	Business loans to clear ATO debt
Squeezed day-to-day cash	Working capital with re-timed repayments	Working capital loans
Property-backed debt	Commercial refinance	Commercial loan refinance
Short-term debt that has outlived its purpose	Longer-term replacement	Short-term vs long-term business loans

What does the timing of a refinance look like?

Refinances rarely happen overnight. The path normally runs from gathering the current loan documents, to approaching lenders, to approval, to payout of the old debt and settlement of the new one. Each step depends on the lender, the security and how quickly documents arrive, so we avoid promising dates. Starting well before a fixed term ends, a balloon falls due or a lender sets a deadline gives far more room to compare options.

Why bring in Ownright?

Trevor Scott has more than 40 years in finance and has arranged refinances for businesses at every stage: sound operations tired of a lender, owners under pressure from a tax debt, and companies whose facilities simply grew into a tangle. We start by mapping every debt, its security and its cost to exit, then work out what the business actually needs the new arrangement to do. If you want to know what is realistic, send us a list of your current facilities through the application page and we will explain the options plainly.

Ready to look at your options?

A refinance should leave the business in a stronger position, not just a different one. Talk to Ownright about what you want it to achieve and we will explore the possibilities together. If Ownright can’t find the solution, no one can.