Refinancing private and expensive business debt

Refinancing is where private lending earns its keep. Sometimes a loan reaches its end date before the exit is ready. Sometimes a business has stacked up three or four expensive online loans that are eating its daily takings. Sometimes the bank has simply decided it wants out. A private refinance pays off what’s there and gives you a cleaner, longer runway.

Situations we refinance

Expiring private loans. A caveat loan or second mortgage is due, the sale or refinance hasn’t happened yet, and the current lender won’t extend, or will only extend on painful terms.

Bank loans in arrears or called in. A bank has issued a default notice, refused to renew a facility or asked you to refinance elsewhere.

Stacked unsecured debt. Several online or merchant cash advance loans with daily or weekly repayments that are strangling cash flow.

ATO debt plus other debt. A tax bill on top of a short-term loan and an equipment facility, all needing one plan.

What the new lender will ask

When you refinance a loan that didn’t exit as planned, the new lender’s first question is simple: why will this time be different? Expect to discuss:

• why the original exit didn’t happen (sale fell through, bank declined, business hit a bump)
• the current payout figure, including any default interest and fees
• what’s changed, such as a property now listed, financials now lodged or a new contract signed
• the new exit and its timeline, with evidence

A clear, honest answer is the single biggest factor in getting a refinance approved.

Consolidation: the cash flow effect

Here’s an illustrative example of why consolidation helps. A business has three unsecured loans with combined repayments of about $1,900 every business day, roughly $40,000 a month. Refinancing them into one property-secured loan with monthly interest, or capitalised interest, can free most of that cash flow for running the business. The total cost still has to make sense, and the new loan still needs an exit, but the breathing room can change everything.

Planning the next exit properly

A refinance shouldn’t just push the problem down the road. Before you sign, map out:

1. The real exit. Sale, bank refinance or business income, with dates.
2. The buffer. A term that covers the exit plus a few months.
3. The milestones. What needs to happen by month three, six and nine.
4. Plan B. What you’ll do if the main exit stalls.

The exit plan checker is a quick way to see whether your numbers leave enough room.

Keeping costs in check

We don’t quote rates. On a refinance, watch for payout figures on the old loan that include default charges you could negotiate, overlapping legal costs, and minimum interest periods on the new loan. Ask for every figure in dollars and compare the total against the cost of staying put.

A worked example: the second private loan that fixed the first

A Gold Coast importer had taken a six-month caveat loan through another broker to clear an ATO debt. The business recovered more slowly than planned, and the loan was about to expire with default fees and higher charges written into the contract.

The owner’s home had risen in value since the first loan, and the business had steadied. A new private lender refinanced the caveat into a twelve-month second mortgage, paying out the original lender in full before the default date. The longer term gave the business time to rebuild its accounts, and the new loan carried no monthly repayments because interest was capitalised.

We also checked that the plan this time was realistic. The new exit was a bank refinance supported by an accountant’s projections, with the sale of a work vehicle as a backup. Eleven months later, the bank refinanced both the first mortgage and the private loan into a single facility.

Warning signs it’s time to refinance

• your current private loan expires in under two months and the exit isn’t ready
• the original exit has fallen through, such as a sale that collapsed
• you’re paying default interest or extension fees
• the lender has issued a notice or letter of demand
• you have several small loans whose repayments are straining cash flow

Acting early gives you choices. Waiting until a default notice arrives limits them, so raise it with us as soon as the timing looks tight.

Get a straight assessment

If a loan is due, in arrears or simply costing too much, tell us what’s owed, to whom, the property you can offer and the plan from here. We’ll tell you honestly whether a refinance makes sense. There’s no credit check when you first enquire, and your details stay with us.

Please give us accurate payout figures and dates so we can match you to a lender who can act in time. Start your enquiry, or read about exit strategies lenders accept and then send it through.