The easiest way to refinance existing business debt

Why refinancing business debt works for Altona Gate operators

Refinancing existing business debt replaces current facilities with a new loan structure that reduces costs, consolidates repayments, or releases equity. For businesses operating near the Port of Melbourne logistics corridor or servicing Altona Gate's industrial and retail precinct, refinancing can free up cash flow without disrupting operations.

Consider a distributor operating from the Altona Gate commercial zone with three separate facilities: a secured asset loan at 7.8% variable, an unsecured business loan at 12.5%, and a business overdraft at 14%. Combined repayments sit at $8,400 per month. Refinancing into a single secured business loan at 7.2% cuts monthly repayments to $6,900, releasing $1,500 per month back into working capital. The business uses that difference to prepay inventory during supplier discount periods.

When refinancing beats adding new debt

Refinancing makes sense when your existing loan structure no longer matches your business model or when you can access lower interest rates. If your business credit score has improved since you took out the original facility, or if you now have property or equipment to offer as collateral, switching from unsecured business finance to a secured business loan can reduce your rate by 4% to 6%.

A manufacturing business near the Kororoit Creek industrial area was paying 11.2% on an unsecured term loan taken out during startup. Two years later, with consistent revenue and business financial statements showing positive cash flow, the operator refinanced to a secured facility at 6.9% using recently purchased machinery as collateral. The shift dropped monthly repayments by $2,200, and the loan structure included a redraw facility for seasonal working capital needs.

How commercial lenders assess refinance applications

Lenders assess refinance applications using your business credit score, debt service coverage ratio, and recent business financial statements. A debt service coverage ratio above 1.25 signals that your cash flow comfortably covers repayments. Lenders also review your cashflow forecast to confirm the refinanced loan aligns with revenue cycles.

If you are consolidating multiple facilities, lenders calculate your total exposure and compare it against collateral value. For secured business loans, they typically lend up to 70% of equipment or property value. If you are refinancing unsecured debt into a secured loan, you will need an asset valuation and evidence that the equipment or property is unencumbered or has sufficient equity.

Fixed versus variable interest rates in a refinance

Choosing between a fixed interest rate and a variable interest rate depends on how predictable you want your repayments to be. A fixed rate locks your repayment amount for a set term, usually one to five years, which suits businesses with tight margins or seasonal revenue. A variable interest rate moves with the market, offering flexible repayment options and often a redraw facility, but your repayments can increase if rates rise.

If your business handles contracts with fixed pricing, a fixed rate protects your margin. If your revenue fluctuates and you want the option to make extra repayments without penalty, a variable rate with redraw gives you that control. Some operators split the loan, fixing half and leaving half variable, to balance certainty with flexibility.

What refinancing costs to factor in

Refinancing involves discharge fees on your existing loan, application fees on the new facility, and valuation costs if you are switching to a secured loan. Discharge fees typically range from $300 to $800 per facility. Application fees vary by lender, sitting between $500 and $1,500. If you are using property or equipment as collateral, expect valuation costs between $800 and $2,500 depending on asset type.

Calculate whether the interest rate reduction covers these costs within the first 12 months. If refinancing saves you $1,800 per month and costs $4,000 upfront, you break even in just over two months. If the saving is smaller or the exit costs are high, the payback period extends and the benefit diminishes.

How to structure a refinance for business growth

Refinancing is not just about reducing costs. It can also unlock equity for business expansion, equipment financing, or working capital. If you own commercial property or machinery with equity, refinancing lets you access that value without selling the asset.

A logistics operator near the Millers Road freight hub refinanced a commercial property loan and drew an additional $120,000 against equity to purchase two new trucks. The loan amount increased, but the interest rate dropped from 7.4% to 6.5%, and the business expanded its delivery capacity without needing a separate equipment finance application. The loan structure included progressive drawdown, so the operator only paid interest on funds as they were used.

Access business loan options from banks and lenders across Australia

Working with a broker gives you access to business loan options from banks and lenders across Australia, including commercial lending panels that do not deal directly with the public. Some lenders specialise in invoice financing or working capital finance, while others focus on secured term loans for equipment or property. A broker compares loan structures, interest rates, and flexible loan terms to match your refinance to your business model.

For businesses in Altona Gate with complex income structures or multiple entities, brokers can package refinance applications to present cash flow and collateral in the format each lender prefers. That preparation increases the likelihood of express approval and reduces the time spent in credit assessment.

Call one of our team or book an appointment at a time that works for you to review your current business debt and identify whether refinancing delivers measurable value for your operation.

Frequently Asked Questions