It starts sensibly. A short-term loan to cover a quiet month. A merchant cash advance when a machine broke down. A credit card for supplier bills. Then the IRD arrangement. Before long, the business is making six different repayments on six different schedules, some of them daily, and none of it is getting smaller.
Refinancing — rolling those debts into one — can be the moment the business gets its breath back. It can also be a mistake if it’s done without looking at the numbers. Here’s how to tell the difference.
When does refinancing make sense?
Refinancing expensive business debt usually makes sense when at least two of these are true:
- The total cost is falling. Once you add up every fee and cost, the new facility costs less than keeping the existing ones.
- Cash flow improves. One structured repayment replaces daily or weekly deductions that squeeze working capital.
- It solves a problem. Clearing IRD arrears, removing a lender threatening default, or cleaning up the bank statements before a bank refinance.
- There’s a plan to reduce the debt, not just rearrange it.
If the only benefit is a lower weekly payment because the same debt is spread over a longer time, be careful. That can be right in a tight spot, but it isn’t a saving.
How do you refinance business debt?
With property security. A property-secured business loan from $20,000 to $1m, secured as a first or second mortgage on New Zealand property you or a supporter own, can pay out multiple creditors at settlement — including IRD. No financials or tax returns are needed for the initial assessment, and bad credit and arrears are considered case by case. This is the most common consolidation route for larger or messier situations.
Without property. An unsecured business loan sized to your turnover may be able to replace one or two smaller facilities, particularly if the business has been trading 6+ months and the bank statements are strong once the existing deductions are accounted for.
Step one: list everything
Before anyone can tell you whether a refinance saves money, you need a complete picture. Make a list:
| Creditor | Balance | Repayment | Frequency | Overdue? | Early repayment cost? |
|---|---|---|---|---|---|
| Example: advance provider | Daily | ||||
| Example: short-term lender | Weekly | ||||
| Example: IRD (GST) | Arrangement |
Get payout figures in writing from each lender — the amount needed to close the facility on a specific date, including any break costs.
Step two: compare total cost, not repayments
The mistake most people make is comparing weekly repayments. The right comparison is total cost:
- What will you pay in total if you keep the current facilities until they’re repaid?
- What will you pay in total under the new loan, including establishment, legal and any early repayment costs on the old facilities?
A specialist will do this with you. Every loan is priced on the individual situation, and we’ll look across our lending partners for the sharpest option available, but the decision should rest on the full comparison, not the headline. Our guide to reading a business loan offer shows what to look for.
Why daily deductions matter
Merchant cash advances and some short-term loans take repayments daily from your card takings or bank account. Beyond the cost, they create two problems:
- Your working capital never settles. Every day starts a little short.
- Your bank statements look stretched. When a future lender reviews them, they see dozens of loan repayments and may conclude the business is overcommitted.
Refinancing into a single structured repayment fixes both.
Don’t consolidate and then re-borrow
The biggest risk after a refinance is taking on new short-term debt because the old limits are suddenly available again. Close the facilities you’ve paid out. If you need a buffer, set up one properly-sized line of credit instead of reopening several.
When refinancing isn’t the answer
If the business is losing money each month, consolidation delays the problem rather than solving it. If that sounds like you, talk to your accountant about the underlying numbers first. We’ll tell you plainly if we think a refinance won’t help.
Get the list together and call
Put your list of debts in front of you and ring the Hotline. A specialist will work through whether refinancing genuinely saves you money. Or request a call back.