Tidying up business debt: is refinancing right for you?

Business debt tends to accumulate the way clutter does. An equipment loan here, a credit card there, a short-term advance to get through a slow month, then another to cover the first one’s repayments. Each made sense at the time. Together, they can leave you working for your repayments instead of the other way round.

If that sounds familiar, refinancing or consolidating might help. But it isn’t automatically the answer. Let’s work out whether it’s right for you.

Start with a debt map

You can’t tidy what you can’t see. Before talking to anyone, list every business debt:

Facility	Balance	Repayment	Frequency	End date	What it funded
Equipment loan			Monthly		Excavator
Business credit card			Monthly	Ongoing	General
Short-term advance 1			Daily		Wages in a slow month
Short-term advance 2			Weekly		Repaying advance 1
ATO debt			Plan instalments		BAS

Then add up the total you’re repaying each month. Compare it to your quietest month’s income. That comparison often tells you everything.

When does consolidating make sense?

Consolidation is usually worth exploring when:

• Repayments are squeezing cash flow so much that normal bills are becoming hard.
• Short-term advances are stacking up, especially ones with daily or weekly deductions.
• Debts are mismatched to their purpose — short-term money funding long-term assets.
• You’re managing several lenders and the admin itself is a burden.
• ATO debt is part of the mix and you’d like one plan for everything.

It’s worth being more cautious when the existing debts are nearly paid off, when break costs are high, or when the new structure only lowers the repayment by stretching the term a long way.

Which option suits a refinance?

Situation	Tends to suit	Why
Several debts, property available	Property-secured loan	Larger amount, one repayment, security helps with bruised credit
Two or three smaller debts, trading business	Unsecured loan	Sized on turnover and bank statements
Stacked short-term advances	Often property-secured	Replaces frequent deductions with one planned repayment
Recurring cash gap caused the debt	Refinance plus a line of credit	Fix the gap, not just the debt

Property-secured loans run from $20,000 to $5,000,000; unsecured options are typically $5,000 to $500,000.

With your debt map in hand, a real person can tell you what’s realistic — there’s no credit check when you first enquire.

How do you compare the true cost?

A lower repayment feels like a win, but look at the whole picture:

1. Total cost of your current debts from today until each is paid off, in dollars.
2. Total cost of the new structure, including establishment fees, legal costs and any break costs on the old debts.
3. The term. Stretching a two-year debt over five years lowers the repayment but can raise the total.
4. What it frees up. Sometimes paying a bit more overall is worth it if it stops the cash squeeze that caused the debt in the first place.

There’s no right answer in the abstract — only for your numbers.

What caused the debt in the first place?

This is the question that decides whether consolidation works long-term. If the debt came from:

• a one-off event (a flood, a lost customer, a big repair), consolidating can reset things cleanly;
• a recurring cash gap, you also need a tool for that gap, such as a line of credit, or the advances will return;
• a structural problem (pricing, costs, a shrinking market), the business needs fixing alongside the refinance.

Our cash flow gap guide helps you tell these apart. business.gov.au’s financial health review is also worth a look.

An illustrative example

Illustrative only. A print shop took two short-term advances during a slow winter, both repaid by daily deductions. It also has an equipment loan and a small ATO payment plan. Daily deductions are now so large that the owner is short every week, even though sales have recovered.

His funding plan ranks a property-secured loan first, because he owns his home and the combined amount is substantial. The coach’s note suggests mapping all four debts, getting payout figures for the advances and comparing the total cost. It also flags a line of credit as a possible second tool so winter doesn’t trigger new advances next year.

What questions should you ask about any new facility?

Before you sign a consolidation or refinance, ask:

• What’s the total cost in dollars over the whole term, including every fee?
• Are there break costs or early repayment fees on my existing debts?
• Can I repay the new facility early if things go well?
• What security is being taken, and over which property or assets?
• How often are repayments — monthly, fortnightly, weekly?
• What happens if I miss a repayment?

Clear answers to these make it easy to compare the new structure with what you have now.

Ready to simplify? Let’s look at the whole picture

Tidying up debt can feel like finally being able to breathe again. We’ll help you work out whether consolidating is genuinely better for your business, and we’ll be straight with you if it isn’t.

The enquiry takes about a minute and doesn’t involve a credit check. We won’t spread your details across a crowd of lenders; a real person looks at your situation and calls you. Please be upfront and accurate about what you owe — it’s the only way to find a fit that actually works.

See if you qualify →