Your finance broker Corey Marino Founder & Finance Broker, FBAA member M-354085 · Diploma-qualified finance broker
The short answer
Business debt refinancing should be compared using current payouts, exit charges, new fees, repayment frequency and the new term. Check both the cashflow improvement and total cost. X Lend can organise a like-for-like comparison before you switch.
A business refinance should solve a defined problem after payouts, fees, term changes and security are considered. Combining several repayments into one can simplify administration, but it does not automatically lower total cost or improve the business's position.
Build a current liability schedule
List every facility being reviewed with its current payout, limit, utilised balance, rate, repayment, remaining term, security and early-payout cost. Use current statements and payout letters rather than accounting balances, which may not include accrued interest or closure charges.
Separate facilities that should remain in place. A useful trade line, equipment loan or low-cost overdraft should not be refinanced merely to make the table shorter.
Define the actual objective
Common objectives include lowering total borrowing cost, reducing the near-term repayment, releasing security, replacing a facility that no longer fits, adding working capital or aligning several maturities. Rank the objectives because one structure may not maximise all of them.
For example, extending the term can improve monthly cash flow while increasing total interest. Releasing property security may be worth a higher rate to one business and unnecessary to another.
Compare on a from-today basis
Create two columns: keep the current facilities and complete the proposed refinance. Include:
- payouts and discharge costs;
- new establishment, valuation and legal costs;
- ongoing fees;
- repayment frequency and amount;
- fixed or variable rate treatment;
- remaining and proposed terms;
- any balloon, residual or interest-only period;
- security and guarantees; and
- total repayments from the comparison date.
The Australian Government's business-loan cost guidance recommends understanding income, expenses, debts and cash flow and researching comparable products before negotiating or changing a facility.
Put every future dollar in the comparison
Illustrative schedule, not a quote: two existing business loans each have 24 months left. Loan A requires $2,500 monthly and Loan B $1,500 monthly, with no balloons or additional future fees. Keeping both means 24 × $4,000 = $96,000 from today.
Assume a proposed 24-month refinance has $3,700 monthly payments and $2,000 of switching costs paid separately upfront. Total cash out is 24 × $3,700 + $2,000 = $90,800, or $5,200 less. If instead the offer is $2,700 over 36 months with the same upfront cost, total cash out is $99,200, or $3,200 more.
These payment schedules are assumed inputs, not interest rates calculated from a stated principal. Obtain actual payouts and confirm the new finance clears them without extra cash being added. Show changed security alongside the figures; these totals alone cannot judge that exposure.
Model the cash-flow effect
Insert both current and proposed repayments into a cash-flow forecast. Check the lowest cash balance, not just an average month. If the refinance includes extra working capital, show that amount and purpose separately so the new borrowing is not mistaken for a switching cost.
Review security before signing
Record every asset and guarantee supporting the current facilities, then map the proposed security. Confirm which registrations or mortgages will be released and which new ones will be taken. A lower repayment may not compensate for giving a lender broader security than the business intended.
Break-even and exit
Dividing upfront switching costs by the expected regular saving is only an initial screen. It can mislead when principal reduction, remaining terms or repayment timing differ. At the intended exit date, compare cumulative payments, separately paid fees and the remaining payout for each option; use the full schedules for the held-to-term comparison. Also ask what happens if the business repays early, sells a secured asset or requires another facility during the proposed term.
Documents to prepare
Provide current facility statements, payout letters, finance and security schedules, bank statements, recent BAS or accounts, the refinance objective and a forecast showing the resulting position. Where property or specialised assets are involved, valuations and ownership documents may also be required.
The business.gov.au application guide notes that documentation varies but may include financial reports, forecasts, leases and personal financial information.
How X Lend Finance compares a refinance
We reconcile the current debts and proposed use of funds, then compare suitable lender structures against the stated objective. The output should show the cash-flow change, security change, break-even period and estimated total cost. Approval, payout requirements and final terms remain subject to the selected lenders.