Refinancing Existing Debt

Over a period of time a business can, often end up with several different loans with various lenders and terms.  When this is the case, it is important to consider whether this debt should be consolidated or refinanced by restructuring the overall borrowing.

By consolidating debt, you would combine several loans from the same or different lenders to one single loan with one provider.  This could be an entirely new lender, or one of the previous lenders.  There can be several benefits of consolidating debt:

• It can mean a lower monthly cost, especially if you are able to agree a lower interest rate than those previously secured.
• A new loan, over a longer period may help to reduce monthly payments, helping with cash flow if this is something that needs addressing.  Although, it must be remembered that you will pay more interest overall if you extend the loan term.
• There can be an administrative cost and time saving, by reducing the number of lenders and loan to one.

By refinancing, you would pay off an existing loan by taking out a new loan.  You will end up with a new repayment term, albeit longer or shorter depending on cash flow and business requirements, a lower monthly payment and a more convenient payment structure reflecting the current business operating cashflow.

Sometimes, what holds a business back from refinancing is if one or more of the existing loans are on a favourable fixed rate.  Though there won’t be a penalty for breaking a fixed rate loan (sometimes there is compensation paid) where a new fixed rate is higher than the existing fixed rate, the overall monthly repayments are squeezing cashflow short term which could be detrimental to the long term business direction.

It is often a very worthwhile exercise to consider whether a change in your debt structure could be beneficial to your business, particularly when circumstances have changed since the loans were originally agreed.

If you would like to have a confidential chat regarding your finances, and whether refinancing or consolidating existing debt may be an option to your business, please contact Sophie at Sophiecahill@fcgagric.com or Tel: 07496 587011.

Our Finance Brokering service can find you the best deal that suits your business today, not necessarily what your current finance providers can offer.  The offer of new borrowing is never guaranteed and will entirely depend on your unique and specific business circumstances.

Midwest Consulting Limited is regulated by the Financial Conduct Authority and is a registered credit broker FRN793780. We are members of the NACFB.