Refinancing expensive short-term business debt

How expensive debt builds up

It rarely starts as a plan. A business takes a quick online loan to cover a slow month, repaid daily. A few months later, another offer arrives and fills a new gap. A merchant cash advance follows, taking a slice of every card sale. Meanwhile a supplier account slips to 60 days and the ATO balance grows.

Each decision made sense at the time. Together, they can leave a business with most of its daily takings going to repayments before wages, rent or stock are paid. That’s when refinancing becomes worth a serious look.

Signs it’s time to refinance

• Repayments go out daily or weekly and you plan your week around them.
• You’ve taken a new facility to meet repayments on an older one.
• The total of your repayments is a large and growing share of deposits.
• A lender has started default or recovery steps.
• Your ATO balance is rising while other lenders are paid first.

What a refinance can do

Before	After (typical aim)
Several lenders, several repayment dates	One lender, one repayment arrangement
Daily or weekly debits	Monthly repayments, interest-only or capitalised interest
Short remaining terms	A term that matches a realistic repayment plan
ATO debt accruing charges	ATO paid out at settlement
Overdue suppliers	Suppliers paid, relationships repaired

Property-secured refinancing is the most common approach, because it can clear several facilities at once and support larger totals. A second mortgage leaves your home or commercial loan in place; a private first mortgage suits unencumbered property or where the first lender also needs paying out. Up to $5m is possible within 24–48 hours once payout figures are in hand.

Doing the maths properly

Refinancing isn’t automatically cheaper. Work through:

1. Current total cost: what you’d pay if you ran every existing facility to the end, including remaining fees.
2. Payout cost: early repayment fees or remaining fixed charges on each facility.
3. New loan cost: all fees plus total interest over the new term.
4. Cash-flow impact: how much more cash stays in the business each month.

The loan cost calculator lets you compare the new offer’s total cost in dollars. Even if total cost is similar, freeing up weekly cash flow can be what keeps a business stable.

Ready to see whether consolidation works for you? Start your enquiry — no credit check to ask.

Payout letters: the slowest part

Every lender being refinanced needs to confirm the exact amount to pay them out on a given date. Some short-term lenders provide this within hours; others take days. Request payout letters from every lender the moment you decide to proceed, and ask how long the figure is valid for.

When refinancing isn’t the answer

If the business is losing money every month, refinancing can buy time but won’t fix the cause. Before consolidating, look honestly at whether the business is viable, and speak with your accountant. For company directors concerned about solvency, ASIC’s guidance for directors of companies in financial difficulty is a useful starting point, alongside professional advice.

Mistakes to avoid

• Refinancing then re-borrowing. Close the old facilities and decline new short-term offers once you’ve consolidated.
• Ignoring the ATO. Include tax debt in the refinance where possible; it’s often the most pressing.
• Choosing a term that’s too short. A refinance that needs another refinance in three months hasn’t solved much.
• Not reading the new terms. Small business loan contracts are generally covered by the unfair contract terms protections ASIC administers, but you still need to understand fees, default terms and early repayment conditions.

An illustrative example

A Brisbane café group has three online loans with daily repayments, a merchant cash advance and an ATO balance. The owners hold equity in their home. A second mortgage pays out all five at settlement, replacing daily debits with a single monthly interest-only repayment and a planned refinance to a bank after two years of clean conduct. Illustrative only.

Preparing a refinance file

Refinances move fastest when the lender can see the whole picture at once. Gather:

1. A debt schedule. Every facility: lender, balance, repayment amount and frequency, and whether it’s secured.
2. Payout letters from each lender, or at least confirmation that they’ve been requested.
3. Six to twelve months of business bank statements, so the lender can see the repayments you’re replacing.
4. Your ATO statement of account, if there’s tax debt.
5. Property documents for the security: rates notice and current loan statements.
6. A short explanation of how the debt built up and what’s changed — a new contract, a cost cut, a partner’s exit.

That last point matters more than many owners expect. A lender refinancing stacked debt wants confidence that the business won’t rebuild the stack six months later. A brief, honest account of what’s different now is often what gets a refinance approved quickly. If you’ve already cut costs, dropped an unprofitable line or signed a better-paying customer, include the evidence.

One plan instead of five repayments

If short-term debt is running your week, a refinance could give you room to run the business again. Enquiring doesn’t involve a credit check, your details aren’t auctioned off to multiple lenders, and a real person will look at every facility with you before recommending anything. Please list all current loans and balances accurately on the form — it’s the only way to design a refinance that genuinely works. See if you qualify.