Refinancing means taking out a new facility to repay an existing one, usually to change the structure of the borrowing. A business might refinance to adjust the term, consolidate several debts, or align repayments with current cash flow.
Common reasons businesses refinance
Refinancing is not automatically better or worse than keeping an existing facility; it depends on the terms of both. The aim is usually to make repayments fit the company's circumstances more comfortably.
- Spreading repayments over a different term to ease monthly cash flow.
- Bringing more than one facility into a single, simpler arrangement.
- Replacing borrowing whose terms no longer suit the business.
What to weigh up
Before refinancing, compare the total cost of the new arrangement against the existing one, not just the size of each payment. A longer term can lower instalments but may increase the total interest accrued. Check whether any early-settlement amount applies to the facility being repaid.
Credicorp lends only to UK limited companies and LLPs for business purposes and is an exempt business lender, so the Financial Ombudsman Service and FSCS do not apply. If you are considering refinancing a Credicorp facility, ask our team for a settlement figure and the terms of any new offer before deciding.
See also: What is restructuring a loan?, What is an early repayment charge (ERC)?, What is a promissory note?.