If you have a business loan but it no longer meets your needs, or circumstances have changed in your business, you might want to look at refinancing. Refinancing could help you save money or improve your cash flow, but it’s important to weigh up the benefits and costs to decide whether it’s the right move for your business.
What is a business loan refinance?
Business loan refinance is when you replace your existing business loan with a new one, either with your existing lender or a different provider. The replacement loan is used to pay out the original, and your outstanding debt is moved into the new loan agreement.
While the amount you owe stays the same, this gives you the opportunity to adjust the loan terms, structure or repayment conditions to better suit your business needs.
Why might my business look to refinance its loan?
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Your business is in a stronger financial position
If your business performance has improved since taking out your original loan, you may qualify for lower rates or more flexible terms.
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Market conditions have changed
If market interest rates drop, refinancing can help you access a more competitive deal.
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You need additional funding
Rather than applying for a separate loan, refinancing can allow you to increase your borrowing amount and access extra funds.
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You want lower repayments
Refinancing to a longer loan term can reduce your regular repayments and ease pressure on your cash flow, though you may pay more interest over time.
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You’re managing multiple debts
Consolidating existing business debts into a single loan can make repayments easier to manage and potentially reduce overall costs.
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You want to remove a secured asset
Depending on your business’ situation, you may be able to refinance from a secured loan to an unsecured one and release an asset tied to the loan.
How much can I save by refinancing my business loan?
How much you could save by refinancing your business loan depends on the size of your loan, the loan term and the change in interest rate you get when switching. In some cases, savings can add up to thousands of dollars over the life of the loan.
For example, here’s how much you could save by reducing the interest rate on a $70,000 business loan repaid over five years:
| Interest rate | Monthly repayments | Total interest | Total amount | Savings compared to original loan |
|---|---|---|---|---|
| 8% p.a. | $1,419 | $15,161 | $85,161 | – |
| 7% p.a. | $1,386 | $13,165 | $83,165 | $1,996 |
| 6% p.a. | $1,353 | $11,198 | $81,198 | $3,963 |
| Figures calculated using Savvy’s business loan repayment calculator. Amounts are indicative only. They do not include any fees or charges associated with refinancing. |
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In this scenario, just a 1% drop in the interest rate could save almost $2,000 over the life of the loan.
However, it’s important to factor in the cost of refinancing when working out your true savings and whether switching actually leaves you better off overall.
Fees that may apply when refinancing include:
- Early exit fees: some lenders may charge an early exit fee if you repay your loan before the end of the term. These are often minimal or waived on variable loans, but fixed-rate loans can include break fees that cost thousands of dollars depending on the loan and time remaining.
- Loan discharge or termination fees: some lenders may charge a fee when you close your existing loan, which can be up to $500.
- Establishment fees: your new loan may include an set-up fee, which could be a flat amount or a percentage of the loan (often around 1–3%), potentially adding up to hundreds or thousands of dollars.
These fees can reduce or, in some cases, outweigh the savings from refinancing, so it’s important to be aware of them before switching.
Business loan calculator
Crunch the numbers to see what your repayments could look like
Your estimated repayments
$98.62
| Total interest paid: | Total amount to pay: |
| $1233.43 | $5,143.99 |
The pros and cons of refinancing a business loan
Pros
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Save money on your loan
You may secure a lower interest rate or better loan terms, reducing what you pay over time.
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Improve cash flow
Lower repayments or a simpler debt setup can leave more money available for day-to-day spending or growth.
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Tailor your finance to your business needs
As your business evolves, you can move to a loan that better suits its needs and goals.
Cons
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Upfront costs will apply
Refinancing comes with a number of fees, which can eat into any savings made by switching.
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You may pay more over the life of the loan
A longer loan term can ease short-term pressure, but may increase the total interest paid overall.
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Approval isn’t guaranteed
Businesses still need to meet lender eligibility requirements and will be assessed on their current profile, which may impact approval or access to better rates.
How to refinance your business loan through Savvy
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Apply online
Tell us about your business and what you’re looking to refinance.
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Provide your documents
Upload the required paperwork to our secure portal.
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Speak to a broker
We’ll talk you through your business loan refinancing options and match you with a lender.
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Submit your application
Your consultant will finalise and send your application to your new lender.
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Pay out your old loan and start your new one
Once approved, you can pay out and close your existing loan and your new loan will begin.
