Refinance Debt Consolidation Loans

Business debt continues to grow in prevalence in the UK, with more than 750,000 SMEs having debt in 2022, compared to 305,000 before the COVID-19 pandemic. Many of these businesses have more than one type of debt to repay, with everything from overdrafts to commercial mortgages and business loans presenting unique repayment challenges. 

The more individual debts you have, the harder it can be to run your business from a logistical and financial point of view. If your business has multiple debts in place, planning your financial future can be difficult, and repayments will be hard to manage. 

Refinancing allows you to switch from an existing loan to a different product or lender. It can also be used to combine multiple debts into a single line of credit, provided you find the right agreement. 

Here at Rangewell, we can help you navigate the lender’s market and find a provider who can offer the correct type of loan to repay your existing debts and offer a more transparent, manageable repayment agreement. Don’t struggle with your debts, get help from our team today – we’ll help guide you through the refinancing process and demonstrate just how effective debt consolidation can be.

Read on to learn more about how it works, or contact us now to get started. 

How can refinancing help consolidate debts?

Debt consolidation is the practice of combining multiple loans into a single facility, which makes managing repayments far easier and streamlines your finances. It is a type of refinancing, which involves switching from one type of loan to another. 

To consolidate your debts, you’ll need a lender that offers a debt consolidation loan, which sees them paying off your existing debts and establishing a new loan with more straightforward repayment terms. This can be a lender you already have an agreement with or a new one you’ve approached specifically for debt consolidation. 

In many cases, debt consolidation will also reduce the money you’re paying each month, as you won’t be as accountable to fluctuating interest rates across multiple loans. With a single agreement in place, you’ll know exactly how much you need to repay and for how long your term is. 

As with any loan, you’ll need to decide between a secured or unsecured loan. If you’re struggling with multiple loans and need to consolidate, the lender may demand security in the form of collateral such as property. To receive an unsecured loan offer you’ll need excellent credit history and an application that showcases strong business performance. 

After all, the lender agrees to take care of your existing debts, so they want to ensure you are not a risk. Rangewell can again help you by preparing your application, reviewing your business and your financial history and then negotiating the best deal to suit your growth plans.  

Why use a debt consolidation loan? 

Refinancing your existing loans into a single agreement means you’ll benefit from: 

• Easier debt management: you’ll be able to track exactly how much you owe, and repayment terms will be clear. 
• Single point of contact: rather than dealing with multiple lenders, you’ll only need to work with one. 
• Reduced interest rates: having all your debt in one place often means you can enjoy a lower interest rate, but this will depend on your application and negotiations with the lender. 
• Lower repayments: if you can reduce your interest rate, you’ll pay less than you were – but even if you can’t, spreading your new loan across a longer term may reduce your monthly repayments.
• Higher borrowing limits: if you need more cash to help grow your business, refinancing through a debt consolidation agreement can also deliver a higher credit facility if you negotiate with the right lender. 

When to refinance for debt consolidation

Refinancing depends on a lender agreeing to finance your business against its associated risk. For that reason, you need to ensure your application is well prepared and your approach positions you in the best possible light. If your business is failing, refinancing is likely not going to be a viable option as you’ll either receive poor offers or be refused finance entirely. 

However, if any of the following apply, you should consider refinancing: 

Improved credit rating

If your credit rating has improved, lenders can offer lower interest rates than what you are currently repaying with any loans taken out with a worse rating. 

Stronger financial performance

If your business has improved and is now more profitable, you can secure better offers from lenders, so refinancing can be highly beneficial. 

Longevity in business

Lending is all about risk. Businesses that have operated for a long time are deemed less risky, so if you’ve reached a certain milestone and still have debts taken out when your business was new to the market, it’s worth exploring refinancing. 

What are the downsides to debt consolidation loans? 

Many lenders have repayment penalties in place to dissuade you from exiting your loan early. These repayments will vary depending on the lender and agreement, so it’s always worth talking to a finance expert like our team first to help you assess what loans you already have in place and how much it will cost to leave them early. 

You’ll also likely need to pay fees to the new lender, who has to balance the cost of paying off your other lenders first and then weigh your business’s performance and financial history before they set their rates and terms. 

What alternatives are there to debt consolidation loans? 

Many businesses choose not to consolidate their debts and instead continue to repay multiple creditors at once. Some lenders will offer support if you approach them about your loan and may extend the repayment term length or reduce interest rates etc. Negotiation is key. 

If your business is performing well, you could also consider growth equity finance, which sees an investor buy part of the equity of your business. Their financial contribution could then be used to pay off your existing debts. 

However, if things become too challenging for your business and you cannot repay your debts due to failing financial performance, you may be forced into either declaring bankruptcy or selling your business or assets to fund the repayments. 

Consolidate business debt with Rangewell

Rangewell are your refinancing experts, working on your side at no cost to you to find and secure the best finance deal for your business. We’ll help you map out all of your existing debts and then plan a refinancing agreement that suits your needs – including identifying the best rates and terms from mainstream and challenger lenders. 

Don’t struggle with multiple sources of debt when your business needs to grow. Contact our team today to discuss refinancing and see if it’s the right option for you.