How to consolidate an iwoca loan

You can consolidate an iwoca loan by taking out a new business loan and using it to repay the iwoca balance, often alongside other business debts, so you are left with one lender and one repayment. This page is for business owners with an iwoca facility who want simpler repayments, a longer term or a lower overall cost. Whether consolidation actually saves money depends on the new rate, the term, any fees and the settlement terms on your existing agreements. Smart Funding Solutions is an independent broker and can compare consolidation options from lenders on its panel. iwoca is one of the lenders Smart Funding Solutions works with, so a refinance with iwoca itself can be compared alongside other lenders.

If you only want to know whether iwoca itself can change or extend your existing facility, contact iwoca directly first.

For how the iwoca Flexi-Loan itself works, what it costs and who it suits, see our iwoca loans review.

01How consolidating an iwoca loan works

Debt consolidation replaces several existing debts with a single new one: the new lender either pays your old lenders directly or advances the funds for you to clear them. Alongside an iwoca loan, lenders will often consider including business credit cards, overdrafts, other short-term loans, merchant cash advances and revolving credit. Our page on business debt consolidation loans explains the product in full.

02Why businesses consolidate an iwoca loan

• Simpler finances: one repayment date, one lender and one set of terms reduces admin and the chance of missing a payment.
• Lower monthly outgoings: spreading the balance over a longer term can reduce each repayment and ease cash flow.
• Potentially lower cost: if trading or your credit profile has improved since you first borrowed, you may qualify for better terms.
• Several short-term facilities stacking up: businesses that have added a second or third short-term facility on top of an iwoca loan often find the combined repayments hard to forecast.

03The trade-offs

• A longer term can mean you pay more interest overall, even if each payment is lower.
• Some existing agreements have early settlement terms; check each one before you commit.
• The new loan may carry arrangement fees.
• Larger or longer loans may require a personal guarantee or security.
• Consolidation does not fix the cause of the debt. If cash flow is under pressure, address the underlying issue too.

04How to consolidate an iwoca loan, step by step

1. List every debt: lender, outstanding balance, rate, repayment amount and frequency, remaining term and any early settlement terms.
2. Get settlement figures: ask iwoca, and each other lender, for a current settlement amount, and note how long each figure is valid.
3. Work out your target: decide what repayment is comfortable and the total you need to borrow to clear everything.
4. Compare the total cost: add up what you would pay by keeping the existing debts to the end of their terms, and compare it with the total repayable on the new loan including fees.
5. Apply and clear the old debts: once a lender approves, the funds repay the existing lenders and you begin the single new repayment. Ask for written confirmation that each old account is closed.

05What lenders look at

• recent business bank statements, showing turnover and how existing debts are being serviced
• filed accounts or management figures
• business and personal credit history
• a full list of the debts being consolidated, with settlement figures
• identification and proof of address for directors

A clear explanation of why you are consolidating, and how the new repayment fits your cash flow, strengthens the application. Applying usually involves a hard credit search, so avoid applying to many lenders at once.

06Alternatives to consolidation

• Refinancing a single loan: replacing one facility with a new one, sometimes raising extra capital at the same time. See our guide to refinancing a business loan.
• Talking to your existing lender: some lenders may be able to discuss payment arrangements if you are struggling.
• Invoice finance or asset refinancing: releasing cash from invoices or equipment to reduce reliance on short-term loans.

If you are struggling to meet repayments, free, impartial help is available from organisations such as Business Debtline.

A clear explanation of why you are consolidating, and how the new repayment fits your cash flow, strengthens the application.

07Which business debt consolidation loan can replace an iwoca balance?

A business debt consolidation loan that replaces an iwoca balance is usually one of four types. The right one depends on the size of your combined debts, how long you want to repay over and whether you can offer security.

How iwoca's own terms affect the sums

iwoca's Flexi-Loan page states that it does not charge early repayment fees and only charges interest for the days you have the money. Where that applies to your agreement, clearing the iwoca part of your debt costs the outstanding balance plus interest to the settlement date, so the comparison turns mainly on the new loan's rate, term and fees, and on any charges for clearing your other facilities. Older or different iwoca agreements may differ, so get the settlement figure in writing.

When consolidation is the wrong answer

If the new single repayment only looks affordable because the term is much longer, or if the business is still adding short-term facilities each month, consolidation can delay the problem rather than solve it. In that case, talk to your existing lenders, or to a free adviser, before taking on new borrowing.

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