A director's guide to refinancing company debt

2 min read

Swap termsOld debt for new

ConsolidateSeveral into one

Check the costFees can erase the gain

What refinancing does

Refinancing means taking new borrowing to replace existing debt — a lower rate, a different term, or one facility clearing several. The debt doesn't vanish; it's restructured into a better shape. For a director, it's a lever to reduce cost or improve cash flow, provided the new deal genuinely leaves the company better off once every charge is counted.

Good reasons to refinance

Refinancing earns its keep when rates have fallen or your company's profile has strengthened, so new borrowing comes in cheaper; when stretching the term eases a tight monthly cost to a manageable level; or when consolidating several facilities into one payment simplifies life and sometimes lowers the rate. In each case the test is the same: does the whole cost genuinely improve?

Count the full cost of switching

A new facility rarely comes free. There may be an arrangement fee on the new loan and an early-settlement charge on the old one. Stretch the term to cut the monthly figure and you may pay more interest overall. Always compare the total cost of staying put against the total cost of switching — see fees explained and the true cost calculator.

The trap to avoid

The danger is refinancing to survive rather than to save. Consolidating because you can't meet current repayments can mask a deeper margin problem behind a longer, cheaper-looking loan — buying time and adding cost without fixing anything. If the underlying numbers don't work, borrowing your way out usually deepens the hole. Watch for the signs in business debt warning signs.

Refinance from strength

Refinance from choice, not desperation: know exactly what you owe and on what terms, get the settlement figures, and compare the true total cost of switching versus staying. A Credicorp facility is lent to the company with no personal guarantee, so a refinance keeps the borrowing on the business. Check it's affordable with the affordability calculator.

Frequently asked questions

When should a company refinance its debt?

When the new deal's total cost, fees included, is genuinely lower than staying put, or when easier repayments truly help cash flow, or to consolidate several facilities into one simpler (and sometimes cheaper) payment. The test is always whether the whole cost improves once every charge is counted.

When is refinancing a mistake?

When it's used to survive rather than save — stretching debt because you can't meet current repayments usually adds cost and masks a deeper margin problem. If the underlying numbers don't work, refinancing rarely fixes them; it just buys time and often makes the total cost worse.