Refinancing expensive short-term business debt

Short-term business finance does a job. It’s quick, it often needs few documents, and it can save a deal or a payroll. The trouble comes later, when the emergency has passed but the repayments are still taking a big bite every week, and you start wondering whether a cheaper loan could replace it.

Sometimes it can. Sometimes refinancing saves nothing, or even costs more. The difference comes down to a few numbers that are easy to get and easy to compare, once you know which ones matter.

Is the debt expensive, or just fast?

These are not the same. A short loan with frequent repayments can feel crushing because of the repayment rhythm, even if its total cost is reasonable. Another can have gentle repayments and a large total cost tucked into fees and a long tail.

Ask yourself which problem you’re solving:

• Cost problem: you’re paying too much in total for the money you borrowed. Refinancing only helps if the new loan is cheaper in dollars from today onwards.
• Cash flow problem: the repayments are too big or too frequent for your takings, even if the total cost is fair. A longer term or a monthly repayment helps, even if the total cost rises slightly.
• Both: common with daily-repayment products and stacked facilities. You’ll usually need a longer term and a cheaper lender, often with security.

Being honest about which one applies stops you swapping a loan that’s merely uncomfortable for one that’s genuinely more expensive.

Start with a written payout figure

Before you look at any new lender, request a written payout quote from the lender you’re with, dated for a specific day. It shows exactly what closes the loan in full on that date, and it is the most important number in the whole exercise.

How it’s calculated varies a lot:

• Reducing-balance loans usually charge only the interest built up to the payout date, plus any exit fee or break cost in the contract.
• Fixed-cost products, where the total payback is set at the start, often require most or all of that payback even if you settle early. Some offer a discount, some don’t.
• Specific lender terms: as one published example, Prospa’s website, as at October 2026, sets out its early payout as the remaining principal and accrued interest, plus 1.5% of the remaining principal and any outstanding fees. Other lenders use different formulas, so always get yours in writing.

If your payout figure is close to the sum of every remaining repayment, refinancing to save money is pointless. If it’s well below, there’s room to save.

The four-number comparison

With the payout figure in hand, lay out the comparison in dollars, not percentages.

Number	What it is	Where to get it
A. Remaining repayments	Every repayment still due on the current loan, added up	Your contract or repayment schedule
B. Payout figure	What it costs to close the loan today	Written quote from your lender
C. New loan total cost	Establishment fee, other fees and all interest on the new loan	The new lender’s offer
D. New loan amount	Usually B, plus fees if they’re added to the loan	The new lender’s offer

Refinancing saves money if B plus C is less than A. If it isn’t, you’re paying for cash flow relief rather than a saving, which may still be worth it, but you should know that’s the trade. Our loan cost comparison calculator helps you lay two options side by side.

Not sure your numbers add up? Share them with us and a person will go through them.

Where does refinance money come from?

Banks, when trading has settled. If the short-term loan plugged a gap that’s now closed, and your statements and financials show a solid business, a bank term loan or overdraft is often the cheapest way out. Expect a bank to ask for two years of financials and tidy account conduct. When you fit, take the offer seriously.

Non-bank term lenders. If the bank says no, a non-bank lender can replace short, frequent repayments with a business term loan over a longer period, typically with weekly or monthly repayments. Check the new loan’s own early payout terms before you sign, so you don’t repeat the problem.

Property-secured lenders. A second mortgage or first mortgage over property usually brings the lowest cost and longest term of the non-bank options, because the lender relies on equity. Our own lender HomeSec Business Finance lends against property for business purposes, including refinancing other business debt. It’s a strong option when the debt is large or several facilities need clearing, with the obvious caution that the property is at risk if the business can’t repay.

Consolidation, if there’s more than one facility. If you’re carrying several loans, see our page on stacked online loans and the comparison of refinancing versus debt consolidation.

When refinancing is the wrong move

It’s worth saying plainly: not every expensive loan should be refinanced.

• You’re near the end. With only a few weeks of repayments left, the fees on a new loan often outweigh any saving.
• The payout figure includes most of the remaining cost. Fixed-cost products can make early exit almost as expensive as staying.
• The business is still losing money. Refinancing a loss-making business into a longer loan just delays the reckoning and usually increases the total cost. Fix the margin problem first, and consider a free call to the Small Business Debt Helpline.
• You’d be tempted to borrow again. A refinance that frees up cash flow only works if the space isn’t immediately filled with another short-term loan.

Worked example: a fitness studio six months into a costly loan

The figures here are illustrative only.

A fitness studio took a $70k short-term loan to cover a fit-out overrun. The loan had a 12-month term with weekly repayments of about $1,750, so total payback was about $91k. Six months in, membership has grown and the owner wants to cut costs.

• A. Remaining repayments: 26 weeks at $1,750, about $45,500.
• B. Payout figure (written quote): about $41,000, because the contract charges interest on the reducing balance with a small early payout fee.
• C. New loan cost: a non-bank term loan of $41,000 over two years, with fees and interest of roughly $7,500 in total.

B plus C comes to about $48,500, which is more than A. On cost alone, refinancing loses about $3,000. But weekly repayments fall from $1,750 to roughly $470, freeing close to $1,300 a week for marketing and a second instructor. The owner decides the cash flow is worth the extra $3,000, knowingly. Had the payout figure been $35,000, refinancing would have saved money and eased cash flow at the same time.

A short plan to follow

1. Request a written payout figure for a date two to three weeks away.
2. Add up the remaining repayments from your schedule.
3. Decide whether you’re solving cost, cash flow or both.
4. Approach your bank first if your trading and financials have recovered.
5. Compare offers in total dollars, including the new loan’s early payout terms.
6. Let the new lender pay out the old one directly at settlement, so nothing slips through the cracks.

From an expensive loan to one that fits

Short-term debt that’s outstayed its welcome is fixable. With an honest payout figure and the right lender, you can either cut the cost, ease the weekly pressure, or both.

Our enquiry is quick, around a minute, and nobody pulls your credit report just because you asked. We won’t hand your details out to lenders by the dozen, so there’s no wave of cold calls afterwards. A real person reviews your current loan, the payout figure and how the business is trading, then calls you. Note down the actual balance, repayments and remaining term as accurately as you can; that’s how we land on the option that genuinely improves your position, first time round.

See what a refinance could look like →