Business loans

Business debt consolidation loans: combining debts into one repayment

Juggling several business debts? See how consolidation loans combine them into one repayment, how to check it will actually help, and the costs and risks.

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In short

What you need to know.

Consolidating business debt makes sense when one new repayment is affordable in quieter months and the total you will repay, including settlement charges and new fees, does not rise more than the breathing space is worth.

Lenders look at bank statements, profitability, a full debt schedule and credit history. If the business cannot afford a single repayment, more borrowing is unlikely to be the answer.

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.

Read the transaction

Sector: Debt consolidation
Structure: Consolidation facility
Outcome: Completed after a title issue was resolved

About business debt consolidation loans

Specialist knowledge. Better outcomes.

A business debt consolidation loan is a new loan used to pay off several existing business debts, so you are left with one lender and one repayment.

It is for businesses juggling a mix of loans, merchant cash advances, overdrafts or credit cards whose repayments have become hard to manage or expensive. Done well, it can reduce monthly outgoings, simplify cash flow and sometimes lower the overall cost of borrowing.

If card balances have built up because a card has been doing a loan's job, our guide to business credit card vs business loan explains which suits which kind of spending.

Smart Funding Solutions is a broker, not a lender. We look across our panel of 300+ lenders for a consolidation facility that fits your business, and we'll tell you if consolidating doesn't look like it would leave you better off. For other ways to restructure or raise funds, see our business finance overview.

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More detail on specific needs within this topic.

Applying and credit

How to consolidate an iwoca loan

Consolidating an iwoca loan only makes sense if the new loan costs less in total, or makes repayments manageable without adding too much interest…

How debt consolidation works

You list your current business debts, with balances, repayments and settlement figures.
A lender assesses your business and offers a new loan large enough to clear some or all of them.
The new lender either settles the existing debts directly or releases funds for you to do so.
You close or reduce the cleared facilities, where appropriate.
You repay the new loan over an agreed term.

The new loan can come from one of your existing lenders or a new one.

What debts can be consolidated?

Unsecured business loans
Merchant cash advances and revenue-based finance
Business credit cards and overdrafts
Short-term and online lender loans
In some cases, asset finance agreements
HMRC arrears: some lenders may consider these, case by case, usually where there is a clear repayment plan

Businesses with several short-term facilities often consolidate to replace frequent daily or weekly repayments with a single monthly one. Our guide to consolidating an iwoca loan walks through one common example.

Benefits of consolidating business debt

One repayment: fewer lenders, dates and statements to manage.
Lower monthly outgoings: a longer term or lower rate can free up cash flow.
Potential savings: replacing expensive borrowing with a cheaper loan can cut the total cost.
More predictable budgeting: a fixed repayment replaces variable ones.

Costs and risks to check first

Total cost: spreading debt over a longer term usually means paying more interest overall, even if monthly payments fall.
Early settlement charges: current lenders may charge to repay early. Ask each one for a settlement figure.
New lender fees: arrangement or other fees on the new loan.
Security: a secured consolidation loan can put property or other assets at risk.
Re-borrowing: if cleared facilities stay open, it's easy to build up new debt on top.

Secured or unsecured consolidation loans

An unsecured consolidation loan doesn't need property as security, but usually needs a personal guarantee and a reasonable credit record. A secured business loan uses property or other assets, which can allow larger amounts, longer terms or lower rates, but the asset is at risk if you can't repay.

Debt consolidation with bad credit

Some lenders consider businesses with adverse credit, often where recent trading is steady. Expect higher rates, and lenders may prefer security. Consolidating at a higher rate only makes sense if it genuinely improves your cash flow or reduces the risk of missed payments.

Who can get a business debt consolidation loan?

Consolidation is usually open to trading businesses whose turnover can comfortably support one new repayment and whose existing debts are being serviced, even if that is a stretch. Limited companies, LLPs, partnerships and sole traders can all apply, although lenders often want to see at least a year or two of trading. The strongest cases show a clear before and after: several short-term facilities with daily or weekly sweeps replaced by one monthly payment that leaves headroom. Businesses already in serious arrears, subject to a winding-up petition or relying on new debt to cover losses will find few lenders, and may be better served by the advice routes at the end of this page.

How long does debt consolidation take?

An unsecured consolidation loan typically takes one to three weeks from a full application to completion, and a secured one often takes several weeks longer. The lender's own decision can be quick; the slower part is usually collecting written settlement figures from every existing lender, some of which expire within days and have to be re-requested close to completion. Merchant cash advance and revenue-based providers each have their own redemption process. Where property is offered as security, a valuation and legal work add time. A complete debt schedule and up-to-date management accounts at the start keep things moving.

Alternatives to a debt consolidation loan

Consolidation is not the only way to ease pressure from several facilities. If only one loan is the problem, refinancing a business loan on a longer term may be simpler. Where the strain comes from slow-paying customers, invoice finance can release cash tied up in the sales ledger instead of adding a new term loan. Businesses that own equipment outright can raise funds through asset refinancing. If a tax bill is part of the problem, compare HMRC Time to Pay with a tax loan. It is also worth asking current lenders directly whether they will extend a term or agree a payment plan.

If your business is struggling with debt

Consolidation works when the business can afford a single repayment. If it can't, more borrowing may not be the answer. Free, impartial advice is available from Business Debtline, and if a tax bill is the problem, GOV.UK explains how to ask HMRC for time to pay if you have difficulties paying HMRC.

Underwriting

What lenders look at

Recent business bank statements and turnover

Profitability, from accounts and management figures

A full list of existing debts, repayments and settlement figures

Business and director credit history

Whether the new single repayment is affordable, including in quieter months

Before you apply

Documents to prepare

A schedule of every debt: lender, balance, repayment, term left and security
Written settlement figures from each current lender
Six months of business bank statements
Latest accounts and management accounts
ID for directors

Side by side

Compare your options

How the main business finance structures work. Lenders set their own terms, so treat this as a guide to the questions to ask.

Option	How you repay	Security	Often used for
Unsecured business loan	Fixed instalments, usually monthly	No charge over assets; a personal guarantee is usually required	Growth, stock, tax bills and cash flow
Secured business loan	Fixed instalments, often over a longer term	A charge over property or other assets	Larger sums, property and refinancing
Revolving credit facility	Interest on what you draw; repay and redraw	Varies by lender and case	Recurring or uneven cash flow gaps
Merchant cash advance	A share of future card takings	No charge over assets	Card-taking businesses with uneven months
Asset finance	Regular payments over the life of the asset	The asset being financed	Equipment, vehicles and machinery
Invoice finance	Settled as customers pay their invoices	Your unpaid invoices	Businesses waiting on customer payment

General information only. Every lender has its own criteria, and all finance is subject to status.

Consolidation vs refinancing

Consolidation combines several debts into one. Refinancing replaces a single existing loan with a new one on different terms, for example a lower rate, a longer term or a higher amount. If you have one facility to change rather than several to combine, our guide on how to refinance a business loan is the better starting point.

Will consolidating actually help? A quick check

Before applying, put your current position and the proposed loan side by side:

Compare	Current debts (add up each facility)	Consolidation loan
Monthly repayment	Total of all current repayments, converting daily or weekly to monthly	Single monthly repayment
Total still to repay	Remaining repayments on each facility	All repayments over the new term
Exit costs	Early settlement charges on each facility	Arrangement and any other fees
Security and guarantees	What each facility is secured on	What the new loan is secured on

If the monthly figure falls but the total to repay rises, you are buying breathing space at a cost. That can still be the right decision if it protects cash flow, but make it knowingly.

Business debt consolidation companies and loan rates: who does what

Business debt consolidation companies fall into three groups: lenders that provide the new loan, brokers that compare those lenders, and debt advisers or insolvency practitioners who help when more borrowing is not the answer. Knowing which one you are dealing with tells you what it can and cannot do for you.

Type of firm	What it does	When it fits
Banks and specialist lenders	Provide the consolidation loan and settle, or release funds to clear, existing debts	The business can afford one new repayment and you know which lender suits it
Commercial finance brokers	Compare lenders, prepare the case and help coordinate settlement figures; they do not lend	You want several lenders' terms side by side, or the case needs a specialist
Free debt advice services	Help you prioritise debts and deal with creditors	Repayments are already being missed or the numbers do not work
Licensed insolvency practitioners	Advise on formal options for companies in serious difficulty	The company may not be able to pay its debts as they fall due

Be wary of any firm that asks for a large upfront fee before a lender has made an offer, or that promises approval. The lending decision always rests with the lender.

What affects business debt consolidation loan rates

Business debt consolidation loan rates are set case by case, so there is no single figure to quote. Pricing usually reflects:

recent turnover and profit, and whether the new single repayment leaves headroom
business and director credit history, including any missed payments on the debts being cleared
whether the loan is secured on property or other assets, or unsecured with a personal guarantee
the size of the loan and the length of the term
how many short-term facilities with daily or weekly repayments are being replaced, and why they were taken out

The rate is only one part of the cost, so compare offers on the total repayable, including arrangement fees and the settlement charges on your current debts, using the quick check above.

Small business debt consolidation

For a small business, consolidation is often about replacing several online loans or merchant cash advances with one monthly repayment; our guide to refinancing a merchant cash advance covers the settlement details. Lenders will want a full debt schedule and six months of business bank statements, and finance of £25,000 or less to sole traders and small partnerships can be regulated consumer credit. If adverse credit is part of the picture, our guide to bad credit business loans explains how lenders view it.

How we arrange a consolidation loan

We go through your debt schedule with you and run the comparison above honestly.
If consolidating makes sense, we identify lenders that will clear the facilities you want to combine.
We approach those lenders and help coordinate settlement figures.
We review offers with you, focusing on total cost and any security or guarantees.
The lender underwrites and decides. Its offer usually lists which facilities must be cleared as a condition; on completion, it pays those lenders from the drawdown against their settlement figures, or releases funds for you to do so.

It is free to enquire; any broker fee is disclosed separately before you proceed. If the numbers work, you can explore funding options online.

FAQs

Questions clients ask

Can I consolidate merchant cash advances?

Some lenders will refinance one or more merchant cash advances into a term loan with fixed monthly repayments, which takes the pressure off daily card takings. The lender will want a settlement figure for each advance and evidence the business can afford the new repayment. Because many advances have a fixed total repayable, settling early may save little, so compare the settlement figures with the cost of the new loan.

Should I close the facilities I have consolidated?

Usually, yes, unless there is a clear reason to keep one open, such as an overdraft you need as a safety net. Leaving cleared credit cards or revolving facilities available makes it easy to borrow again on top of the new loan, which can leave the business worse off than before. Some consolidation lenders make closing them a condition.

Will a business debt consolidation loan affect my credit score?

Applying for a business debt consolidation loan usually involves a full credit search when you formally apply, although some lenders may use a soft search at the early stage. Over time, replacing several facilities with one and making payments on time can help your credit profile. Leaving cleared facilities open and drawing on them again can do the opposite, as it increases your total borrowing.

Can I consolidate personal and business debts into one loan?

Most business lenders will only use a business debt consolidation loan to clear debts owed by the business. Personal credit cards, personal loans or a mortgage are normally dealt with separately, even if the money was spent on the business. A sole trader is in a different position, because business and personal debts belong to the same person, and the regulated consumer credit rules may then apply.

Can I borrow extra money when consolidating business debts?

Yes, some lenders will advance more than is needed to clear existing debts, releasing the difference as working capital. They will test whether the business can comfortably afford the larger repayment, so it helps to explain exactly what the extra money is for. If you only need to change one facility and raise capital, our guide to refinancing a business loan may be the better starting point.

Can I get a business debt consolidation loan with bad credit?

Yes, some lenders will consolidate business debts for a company with adverse credit, particularly where the problems are older, have been settled and recent trading is steady. Expect higher pricing than for a clean record, a personal guarantee and possibly a request for security. The lender will want to see that consolidating genuinely eases cash flow rather than delaying a problem. Recent defaults on the debts being consolidated are the hardest cases to place.

Is it better to use a broker or go direct to a lender for business debt consolidation?

Going direct can work if you already know a lender that suits your case. A broker compares several lenders at once, which helps when the debts include merchant cash advances, short-term online loans or adverse credit, because lender appetite for those varies widely. A broker does not lend or make the decision. We search 300+ lenders, and any broker fee is disclosed separately before you proceed.

Does consolidating business debt stop daily repayments?

It can. When a consolidation loan clears merchant cash advances or short-term loans that collect daily or weekly, those collections stop once each provider confirms settlement, and the business moves to one monthly repayment. Check that every provider has been paid in full and that any direct debits or card-split arrangements have been cancelled, because a collection taken after settlement then has to be reclaimed.

Relevant transactions

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£70,000Building services consultancy

Unsecured routes had not worked. £70K refinanced HMRC and short-term debts.

Project income was due later; HMRC and short-term debts were due now. We restructured them into one facility.

Debt consolidationRead the transaction

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