What is business loan refinancing?
Business loan refinancing means replacing an existing finance facility — or multiple facilities — with a new arrangement that offers better terms. Better terms typically means a lower interest rate, reduced monthly payments, a longer repayment term, fewer facilities to manage, or a combination of all four.
For businesses with adverse credit, refinancing is particularly valuable because the circumstances under which the original finance was taken out — often during a period of financial difficulty — typically resulted in expensive, short-term products at high rates. As trading stabilises and time passes since the adverse credit events, better options often become available through specialist lenders.
Signs that your business finance needs refinancing
You may be paying over 20% APR — if your current business loan rate exceeds 20% APR, or your MCA factor rate was over 1.3, better terms are likely available even with adverse credit. Daily MCA deductions consuming a large share of card sales, multiple lender payments every month, or facilities coming to the end of term are all strong signals. If CCJs have been satisfied or defaults have aged since you took the original finance, you likely qualify for significantly better terms now.
Types of business finance that can be refinanced with adverse credit
Merchant cash advances
MCAs are the most frequent refinancing request we handle. Businesses that took MCAs at factor rates of 1.3–1.5 during a difficult period are often now paying a significant proportion of daily card sales to lenders. Refinancing onto a lower-rate term loan or secured facility can cut monthly outgoings substantially.
High-rate unsecured loans
Short-term unsecured loans taken at rates of 25–60% APR — common for businesses with adverse credit histories — can often be refinanced onto lower-rate facilities as the business stabilises and the adverse credit ages. Secured refinancing using property equity is particularly effective for reducing rates significantly.
Existing asset finance agreements
Hire purchase or finance lease agreements taken at high rates can be refinanced. The existing asset is revalued and a new facility is arranged at current market rates.
Multiple concurrent loans
A business servicing three or more separate finance agreements — each from different lenders at different rates — is a strong candidate for refinancing all into a single structured facility. Lower aggregate rate, one payment, one lender relationship.
Refinancing a merchant cash advance — a real example
Current position: Original advance £60,000 at a factor rate of 1.40, total repayment £84,000, amount already repaid £42,000, outstanding balance £42,000, daily deduction rate 18% of card sales, effective monthly cost approximately £4,200/month.
After refinancing: Refinance loan £42,000 at 24% APR over 24 months, monthly payment £2,350, monthly saving approximately £1,850, no daily deductions, and 18% of card sales freed up. This is an illustrative example — actual figures depend on the outstanding balance, the refinance rate available, and the term.
Early repayment charges — what to check before refinancing
Always check early repayment charges before proceeding. Term loans typically charge 1–3 months' interest on the outstanding balance. MCAs use a fixed total repayment model — the full factor rate amount is owed regardless of when you repay early, meaning early repayment saves no money on the MCA itself, but replacing it with a lower-cost facility still reduces your ongoing monthly commitment. Asset finance agreements often have settlement figures that include remaining interest — always obtain a formal settlement figure from the existing lender before proceeding.
How to refinance business loans with adverse credit
Step 1: List all existing facilities and get settlement figures — the exact amount required to repay each facility in full today, including any early repayment charges.
Step 2: Identify your security position — commercial or investment property and business assets significantly improve refinancing terms available, even with significant adverse credit.
Step 3: Submit an enquiry — tell us about the facilities you want to replace: type, outstanding balance, monthly cost, and any settlement figures. Include your turnover, trading history and credit position.
Step 4: Compare refinancing terms carefully — calculate the total cost comparison, not just the monthly payment. A lower monthly payment spread over a much longer term may cost more overall.
Step 5: New facility completes — existing lenders repaid in full, either by the new lender paying them directly or by funds being advanced to you. From completion, you service a single facility at better terms.