Business debt refinancing and consolidation for UK companies

Business debt refinancing works by taking out new finance, using it to clear one or more existing debts in full, and then repaying the new lender instead. The detail matters, because the cost of leaving old agreements early is part of the cost of the new one.

1. Gather the facts: list every debt you want to refinance, with the lender, balance, monthly repayment, remaining term and any security or personal guarantee attached.
2. Request settlement figures: each existing lender quotes the amount needed to clear the debt on a given date. This may include early repayment charges, interest for a notice period or, for an advance, the full remaining balance.
3. Size the new finance: the new amount usually equals the total of the settlement figures, sometimes with a margin for fees. Some lenders allow extra working capital on top.
4. Lender assessment: the new lender reviews bank statements, accounts and credit records, and looks closely at how the existing debts have been repaid.
5. Settlement: once you sign, the lender either pays existing lenders directly or releases the funds for you to clear them, usually with proof of settlement required.
6. Tidy up: ask each old lender to confirm in writing that the debt is cleared, that any personal guarantee is released and that any registered charge will be marked as satisfied at Companies House.

The last step is often overlooked. An old charge left on the register can make future borrowing harder, and an old guarantee may still be on file even when the balance is zero.

Most common types of business borrowing can be refinanced, but each behaves differently when you pay it off early. Knowing how each one settles helps you decide what to include.

• Business loans: fixed-term loans can usually be settled early. Some lenders charge an early repayment fee or a set amount of interest, and some charge the full interest agreed at the outset.
• Merchant cash advances: most advances have a fixed total repayable set by a factor rate, so paying early may not reduce the amount owed. Refinancing can still help by replacing daily card deductions with a monthly repayment.
• Hire purchase and finance leases: the agreement sets out how the settlement figure is worked out. For companies, this is a contractual matter, so the settlement figure may include some or all of the remaining interest.
• Overdrafts and revolving facilities: these can be cleared, but think about whether you still need a flexible facility alongside the new loan.
• Director loans and HMRC arrears: some lenders will consider these case by case. HMRC debts may also be handled through a Time to Pay arrangement, which is worth comparing.

Consolidation does not have to include everything. Refinancing only the most expensive or most awkward debt is sometimes the better answer.

Yes, the total cost can rise even when monthly repayments fall. The cost of refinancing is the settlement figures for your old debts plus everything you repay on the new finance, compared with what you would have paid by letting the old agreements run.

• Early settlement charges: fees or extra interest for clearing old debts before their end date.
• Interest on the new finance: set by the lender based on risk, term and security.
• Arrangement fee: sometimes added to the loan or deducted from the funds released.
• Security costs: for secured lending, legal or valuation costs may apply.
• Term: the longer the term, the more interest is usually paid overall.

Lenders price refinancing on your company's turnover, profit, credit history, how existing debts have been repaid and the security offered. A company that has grown since taking its original borrowing may be offered different terms, but that is not a given. Test the repayments in our business loan calculator.

Illustrative example only: actual costs depend on the lender and your circumstances.

Imagine a company with three debts: a business loan with 22 monthly repayments of £2,000 left, a merchant cash advance with £22,000 still to repay at about £1,500 a month, and a hire purchase agreement with 10 repayments of £1,600 left.

• Current monthly outgoings: £5,100 (£2,000 + £1,500 + £1,600)
• Total still to pay if nothing changes: £82,000 (£44,000 + £22,000 + £16,000)
• Settlement figures: £41,000 for the loan, £22,000 for the advance (no discount) and £15,000 for the hire purchase, totalling £78,000
• New loan of £78,000 over 36 months with total repayable of £93,600: £2,600 a month

Monthly repayments roughly halve, from £5,100 to £2,600. But the company repays £93,600 instead of £82,000, which is £11,600 more in total, because the debt is spread over a longer period. Whether that is worth it depends on what the freed-up cash allows the company to do.

Most lenders size a refinance loan on affordability first: whether the company's cash flow covers the new repayment with room to spare. The amount needed to clear your debts sets the request, but affordability sets the ceiling.

Lenders typically look at average monthly bank balances, turnover, profit before interest and existing commitments that will remain. Secured lenders also consider the value of the assets offered. If the full amount is not affordable, a lender may offer to refinance only some debts. Our guide on how much your company can borrow explains these checks in more detail.

The main risk is swapping short-term pressure for a longer, more expensive commitment. Check these points before signing:

• Personal guarantees: the new lender will usually ask for one. Read our guide to personal guarantees and consider legal advice, especially if the new guarantee is larger than the old ones.
• Security: a secured refinance may involve a debenture over the whole company, which can restrict future borrowing.
• Early settlement on the new loan: if you might repay early again, check how the new lender charges for that.
• Remaining debts: make sure the plan clears what it is meant to. A gap left between settlement dates can mean paying two lenders in the same month.
• Root cause: if the debts built up because of falling margins or slow-paying customers, refinancing will not fix that on its own.

Refinancing suits companies with a clear plan and affordable repayments. Depending on the situation, other routes can be a better fit:

• Asset refinance: if the company owns valuable equipment or vehicles outright, raising funds against them may support a larger amount, with the asset as security.
• Secured business loans: for larger balances or longer terms where the company can offer security.
• Unsecured business loans: a straightforward option for smaller balances when the company does not want to pledge assets.
• Talking to your existing lender: some lenders will agree a payment plan or a top-up. It costs nothing to ask before moving.

Sometimes, but it depends heavily on the lender. Lenders understand that companies looking to refinance often have cash flow pressure, yet they need confidence the new repayments will be met.

• Missed payments: recent arrears on existing debts make approval harder. A clear explanation and evidence of recovery can help with some lenders.
• Short trading history: minimum trading periods vary from a few months to two or three years.
• Low profits: some lenders focus on bank statement cash flow rather than filed profit, which can help if accounts are out of date.

Each lender makes its own decision and runs its own credit checks once you decide to apply.

Refinancing for limited companies, LLPs and partnerships of four or more partners is generally unregulated business finance. Consumer Credit Act protections generally do not apply, so the agreement itself sets your rights on early settlement, default and fees.

Welcome Finance is not authorised or regulated by the FCA and arranges unregulated business finance only. Read every agreement in full and take independent legal or financial advice if you are unsure. Our guide to regulated vs unregulated business finance explains the difference.

We help you see whether refinancing actually improves your position, then approach suitable lenders on our panel. A dedicated relationship manager, a real person, supports you by phone, email and chat from first enquiry until the lender pays out.

1. Check your eligibility in about 60 seconds, without affecting your credit score.
2. Share details of your existing debts with your relationship manager.
3. We help you gather settlement figures and compare the total cost of refinancing with keeping things as they are.
4. You choose whether to apply. The lender then runs its own credit checks and, if approved, issues an offer.
5. Once you sign, the old debts are settled and you repay the new lender.

We charge you no fee. We are paid a commission by the lender when your finance completes. You can ask how much we will receive, and commission can differ between lenders.

Will refinancing affect my company's credit file?

The new lender's credit check is recorded, and settled debts show as repaid. Over time, a single account repaid on time can help, but this varies by credit reference agency.

Can I borrow extra on top of what I owe?

Some lenders allow additional working capital alongside the refinance, provided the larger total is affordable.

How long do settlement figures last?

Usually only for a set date or short period, because interest keeps accruing. Lenders often request updated figures just before completion.

What if one of my lenders will not provide a settlement figure?

Your agreement usually explains how early settlement works. Without a figure, the new lender is unlikely to proceed with that debt.

Can I refinance a debt that is in arrears?

Some lenders will, but most want arrears cleared or explained. Severe or recent arrears make approval less likely.

Do I need to tell my existing lenders I am refinancing?

You will need to contact them for settlement figures, and some agreements require notice before early repayment.

Is refinancing the same as a debt management plan?

No. Refinancing replaces debts with new borrowing that you repay in full. Formal arrangements with creditors are a different process, often needing specialist advice.

Can partnerships refinance in the same way as companies?

Partnerships of four or more partners and LLPs can apply. Lenders may ask for guarantees from several partners. The same affordability and credit checks apply.

What happens to my old personal guarantees?

Once a debt is settled, ask the old lender to confirm in writing that the related guarantee is released.