How do I refinance my existing business loan to get better terms
Refinancing your business loan can be a smart move if you're paying higher interest rates than you should be or want to improve your cash flow. It's a straightforward process that many UK business owners use to get better terms, and we'll walk you through everything you need to know.
Why refinance your business loan?
There are several reasons why refinancing might make sense for your business right now.
- Lower interest rates - If rates have dropped since you took out your original loan, refinancing could save you money
- Better cash flow - Extending the loan term spreads payments over longer, reducing monthly outgoings
- Improved credit profile - Your business may now qualify for better terms than it did previously
- Consolidate debt - Combine multiple loans into one manageable payment
- Fixed rate certainty - Lock in a fixed rate if you're currently on a variable rate that could rise
- Release equity - If your business assets have increased in value, you might access additional funds
Most UK business owners refinance to save money, simplify their finances, or free up cash for growth.
Check if refinancing makes financial sense
Before you start the process, do some basic maths to see whether refinancing will actually benefit you.
- Calculate your current monthly payment and interest paid over the remaining loan term
- Get a rough idea of what new rates are available for your business type and size
- Factor in refinancing costs, which may include arrangement fees, valuation fees, and legal fees (typically 1-3% of the loan amount)
- Work out how long it will take the interest savings to cover these upfront costs
- If you'll save more than the costs within 12-18 months, refinancing is usually worth exploring
A quick calculation now prevents surprises later and ensures refinancing is genuinely in your favour.
Gather your financial documents
Lenders will want to see your business and personal financial information before agreeing to refinance. Having everything ready speeds up the process.
- Last two to three years of business accounts or tax returns
- Up-to-date management accounts if you have them
- Details of your existing loan, including the outstanding balance, interest rate, and remaining term
- Bank statements (usually the last three months) showing regular income
- Details of any other business debts or personal loans
- Proof of business ownership and your personal identification
- Business plan or overview of current trading, especially if your circumstances have changed significantly
Organised documentation makes a strong impression on lenders and can speed up your application.
Understand the refinancing process
The whole process typically takes 2-4 weeks from application to funds arriving in your account.
Step 1: Apply with a broker or directly with lenders
You can approach lenders directly, but many UK business owners use a broker like Spark Finance. Brokers have relationships with 100+ lenders and can match you with ones most likely to say yes, without you having to apply multiple times.
Step 2: Get an initial assessment
Whether you're working with a broker or a lender, they'll review your situation and give you a preliminary view of what's possible. This usually involves basic questions about your business, turnover, and the loan you want to refinance.
Step 3: Formal application and credit checks
Once you've decided to proceed, you'll complete a full application. The lender will then run a credit check on you and your business to assess risk and set the interest rate.
Step 4: Valuation and underwriting
For secured loans, the lender may instruct a property valuation. Their underwriting team will review all your documents, check your accounts, and confirm they're comfortable with the lending.
Step 5: Offer and acceptance
Once underwriting is complete, you'll receive a formal loan offer with all terms and conditions. You have time to review this, ask questions, and decide whether to accept.
Step 6: Legal work and completion
A solicitor will handle the legal side, including discharge of your old loan and registration of the new one. Your old lender is paid off from the new funds, and you're done.
What lenders look for when you refinance
Refinancing isn't just about swapping one loan for another. Lenders will assess your business afresh, so it's worth understanding what they care about.
- Profitability - Lenders want to see your business is making consistent profit and can afford the new payments
- Trading history - Most UK lenders prefer to see at least two years of accounts, though some will look at newer businesses
- Cash flow - They'll look at your bank statements to confirm regular income and that you're managing money well
- Debt-to-income ratio - How much you already owe compared to what you earn matters; lower ratios are better
- Loan-to-value - If the loan is secured against property or equipment, they'll want confidence in its value
- Purpose of funds - Being clear about why you're refinancing (lower rate, better cash flow) helps lenders understand your intent
- Industry and experience - Some lenders specialise in certain sectors; knowing your industry well is a plus
Most UK lenders are realistic about business life; they understand that profit varies and aren't looking for perfection.
Costs and fees to expect
Refinancing isn't free, and understanding the costs upfront helps you factor them into your decision.
- Arrangement fee - Usually 0.5-2% of the loan amount, charged by the new lender
- Valuation fee - If the loan is secured, expect 200-500 pounds for a property valuation
- Legal fees - Solicitor's fees are typically 300-800 pounds
- Early repayment charge - Your current lender may charge a fee for paying off early (check your existing loan terms)
- Broker fee - Some brokers charge a fee; many, including Spark Finance, don't charge upfront fees as they're paid by lenders
Always ask what the total cost of refinancing will be, so you can weigh it against the interest you'll save.
How Spark Finance can help
Refinancing can feel complicated, but you don't have to navigate it alone. Spark Finance is an FCA-authorised business finance broker (FRN 958123) with access to over 100 lenders across the UK.
- We match your situation to lenders most likely to approve you, saving you time and protecting your credit file
- We explain options clearly so you understand the costs and savings before committing
- We handle the heavy lifting, liaising with lenders and solicitors on your behalf
- We offer a free, no-obligation eligibility check with no credit check at that initial stage, so you can explore your options risk-free
- We're authorised and regulated by the FCA, so your interests are protected throughout
Get in touch for a confidential chat about whether refinancing makes sense for your business.
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Frequently asked questions
Will refinancing affect my credit score?
The new lender will run a credit check, which shows as a hard inquiry and may temporarily lower your score by a few points. However, successful refinancing typically improves your score over time because you're managing debt responsibly and reducing your overall borrowing costs.
How long does business loan refinancing take?
From application to completion, the process usually takes 2-4 weeks. This depends on how quickly you provide documents, how busy the lender is, and whether any issues come up during underwriting. Using a broker can sometimes speed things up because they chase documents and liaise with lenders.
Can I refinance if my business is newer or profit has dropped?
It's possible, but more challenging. Most mainstream lenders want two years of accounts, though some will work with newer businesses. If profit has dropped, lenders may still refinance if your current profit is enough to cover the new loan payments and your business fundamentals are sound. A broker can help identify lenders willing to take a flexible view.
What if I'm turned down for refinancing?
Rejection doesn't mean you have no options. A broker can access specialist lenders or suggest ways to strengthen your application, such as bringing in a guarantor or waiting a few months for stronger accounts. You can also explore other finance options like invoice financing or a business overdraft as a bridge solution.
Important information: Spark Finance Limited is authorised and regulated by the Financial Conduct Authority (FRN 958123). We are a credit broker, not a lender. This guide is for informational purposes only and does not constitute financial advice. Think carefully before securing debts against property or assets. Your business may be at risk if you do not keep up repayments on a debt or other commitment entered into in relation to it.