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In short
Refinancing replaces an existing business loan with a new facility, usually to raise extra capital, move to a fixed rate, extend the term to lower repayments or deal with a loan that is reaching its end. The new lender repays the old one on completion. Lenders look at current affordability and security, while the borrower must weigh early repayment charges, new fees and any guarantees the new facility needs.
Refinancing is for businesses that already borrow and want the borrowing to fit better: a loan arranged in a crisis that now looks expensive, a facility coming to an end with a large balance outstanding, or a business that has grown and needs more than its current lender will add. This page covers the practical side of moving a single facility: why businesses do it, how the switch completes and where it goes wrong. Smart Funding Solutions is a broker, not a lender. We search our panel of 300+ lenders for replacement facilities from around £10,000 to £500,000+, with larger facilities available in suitable cases. The page sits within our business finance section; if you have several debts to combine rather than one to replace, start with business debt consolidation loans.
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A new, larger loan clears the old one and releases the difference for investment. Our guide on refinancing to raise capital covers when the extra money earns its keep. This is often simpler than asking a second lender to sit alongside the first, because many lenders dislike being one of several unsecured creditors.
To fix the rate
Many bank loans and older government-backed loans were written on variable rates linked to base rate. A fixed-rate replacement trades possible future savings for certainty, which suits businesses with thin margins or fixed-price contracts.
To extend the term
Spreading the balance over more years lowers the monthly payment and can take pressure off cash flow. It usually increases the total interest paid, so it is most sensible when the business needs the breathing space to fund something productive, not simply to delay a problem.
To replace short-term or daily-repayment debt
Facilities repaid daily or weekly, such as a merchant cash advance, can be refinanced into a monthly term loan once trading has settled, which makes cash flow easier to predict.
To deal with a maturing facility
Some loans end with a balloon payment or an interest-only balance to clear. Refinancing before the final date, rather than on it, keeps the business in control of the timing.
Legacy government-backed loans
A large number of UK businesses still carry facilities from the pandemic-era schemes, and each behaves differently when you refinance.
Bounce Back Loans. These carry a low fixed rate set by the scheme and can be repaid early without penalty. Refinancing one into commercial borrowing will almost always cost more, so it rarely makes sense unless it is part of a wider restructure. If repayments are the problem, the scheme's own Pay As You Grow options should be explored with your lender first.
CBILS loans. Term loans were written for up to six years, so many are reaching their final years now. Facilities under £250,000 were written without personal guarantees, and the scheme restricted guarantees on larger ones. A commercial replacement may well require a director's guarantee, which is the single most overlooked cost of refinancing a CBILS loan.
Recovery Loan Scheme loans. Details varied between phases of the scheme; the British Business Bank's Recovery Loan Scheme page sets out how it worked. Check your agreement for early repayment terms before assuming the switch is free.
New lenders count the repayments on these legacy loans in their affordability assessment even where they are not being refinanced, so a business with a bounce back loan it keeps still needs to show room for both.
How a lender switch actually completes
Settlement figure. You ask the existing lender for a written redemption statement, valid to a specific date, showing the balance, accrued interest and any early repayment charge.
Application and offer. The new lender underwrites the business on its current figures and issues an offer that names the debt it will clear.
Security. If the old lender holds a debenture or a charge over property, the new lender will want it released, or will need a priority agreement if the old lender is staying in place for a different facility. Our guide to debentures and fixed and floating charges explains what is registered and why.
Completion. The new lender pays the old one directly, usually against an updated settlement figure on the day, and any surplus reaches your account.
Tidying up. The old lender files satisfaction of its charge at Companies House and releases any personal guarantee. Ask for the written release; guarantees do not always lapse automatically when a loan is repaid, particularly all-monies guarantees.
Delays usually happen at stages three and five. The SFS business debt consolidation case shows how a single property title requirement nearly stopped an approved £212,300 deal at completion, and why persistence between lender, borrower and solicitor matters.
Alternatives to refinancing with a new term loan
The main alternatives to replacing a loan with another term loan are refinancing against equipment, refinancing against property, or renegotiating with the lender you already have.
Against equipment:asset refinancing releases cash from vehicles and machinery, which can clear expensive unsecured debt with borrowing secured on the asset.
Against property: a secured business loan can replace unsecured borrowing on a longer term; for owner-occupied or investment buildings see commercial property refinance. The property is at risk if repayments are missed.
With your current lender: asking for a term extension, a payment holiday or a restructure may cost less than moving, and it avoids new legal work.
Who can refinance a business loan?
A business can usually refinance if it can show affordability on today's trading, a clean record of repayments on the existing loan and a sound reason for the switch. Lenders look at:
Affordability on current trading, not when the original loan was taken.
How the existing loan has been run: missed payments or arrears are the first thing an underwriter notices.
Why the business wants to refinance. Saving cost or funding investment is viewed differently from struggling to meet repayments.
Security available and the credit history of the business and directors.
How long does refinancing a business loan take?
Refinancing a single business loan typically takes two to six weeks, longer where property security is involved. An unsecured like-for-like switch can move quickly once the new lender has accounts, bank statements and a redemption statement. Secured refinances take longer because the new lender needs a valuation, its own legal work and the release of the old lender's debenture or charge. The usual causes of delay are an existing lender slow to issue settlement figures, a deed of priority between lenders, title problems on the property and personal guarantees that need formal release. Asking for the redemption statement early, and having a solicitor ready, takes weeks off the process. If the deadline is fixed, a short-term bridging loan can sometimes clear the old lender while the longer-term refinance completes.
Risks and when not to refinance
Refinancing can turn one expensive problem into a longer one. If the business cannot afford its current repayments because trading has fallen, a new loan on a longer term may only postpone the difficulty, and it can add a guarantee or security that did not exist before. Talk to your existing lender, and consider professional advice, before refinancing under pressure; our guide to funding a business through a downturn sets out what to do first when trading falls. Where the pressure comes from tax arrears, HMRC Time to Pay may be cheaper than new borrowing. If refinancing makes sense as part of expansion, our page on growth finance covers the wider picture.
Checklist
Documents you will need
A redemption statement for each facility being cleared.
The existing loan agreement and any security or guarantee documents.
Latest filed accounts and current management accounts.
Recent business bank statements showing the existing repayments.
A schedule of all other finance, including asset finance and legacy scheme loans.
A transaction we arranged
£212,300
Approved, then nearly lost at completion. £212K consolidated.
A property-title requirement threatened a consolidation deal at the last hurdle. We worked it through and kept the structure intact.
We review your existing agreements and redemption figures, tell you plainly whether a switch looks worthwhile after all costs, and approach lenders on our panel suited to the size, security and purpose. We then stay involved through security releases and completion, which is where refinances most often slip. The new lender decides whether to approve. It is free to enquire; any broker fee is disclosed separately before you proceed.
What our clients say
We had already approached other finance companies who weren’t able to help. From our first conversation to everything being completed took around 7 days, and they kept us informed throughout. If you’ve struggled to get help elsewhere, I would absolutely recommend giving them a call.
Business ownerAfter other lenders couldn’t helpGoogle review
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Can I refinance a business loan with the same lender?
Yes. Many lenders will extend a term or top up a well-run loan, sometimes with less paperwork than a new lender. It is still worth comparing the offer with the wider market.
Will refinancing affect my credit score?
Each full application normally involves a credit search. Approaching only lenders likely to accept the case limits the number of searches. Clearing the old loan on time is recorded as settled.
Can I refinance a loan that is in arrears?
It is harder. Most lenders want to see the existing loan up to date. Some specialist lenders consider recent arrears where the cause has been fixed, but the cost will be higher. Our page on bad credit business loans covers the options.
Does refinancing release my personal guarantee?
Only once the old lender formally releases it. Ask for written confirmation, particularly if the guarantee was an all-monies guarantee covering other facilities with that lender. Our personal guarantee guide explains the types.
What does it cost to refinance a business loan?
The cost of refinancing a business loan is the new lender's fees and interest plus any early repayment charge on the loan being cleared. Some existing loans carry no settlement penalty, while others charge a fee or a share of future interest, so ask your current lender for a settlement figure first. Compare the total cost of both options over the same period. Our guide to paying off a business loan early explains settlement charges.
A £1 million business loan is usually a negotiated facility package rather than a single loan, combining term debt, asset-based…
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