Refinancing guide · Sorbus Finance
What does business loan refinancing cost, and what are the risks?
Quick answer
Compare the new agreement’s total repayable plus separately paid fees and exit charges with the remaining payments if you keep existing debts. Count financed charges only once. A lower monthly payment can hide a higher total cost over a longer term. Weigh security, guarantees and covenant changes alongside price.
Which costs should you include?
Lenders and products vary, so not every cost below will apply. The point is to ask about each one rather than discover it at completion.
| Cost | Where it comes from | How to treat it |
|---|---|---|
| Early settlement or prepayment charge | Existing agreement | Count once: separately paid or included in the new loan total |
| Arrangement or facility fee | New lender | Count once, either upfront or within the new loan total |
| Broker fee, if any | Broker | Ask in writing before proceeding |
| Legal and valuation costs | Secured lending | Ask who pays and whether they are estimated or fixed |
| Interest or charges on the new facility | New agreement | Already reflected in the total repayable |
Why can a lower monthly payment cost more overall?
Monthly cost and total cost answer different questions. Monthly payments are one input to an affordability assessment alongside trading cash flow and other commitments. Total cost helps compare the overall amounts paid. A longer term spreads repayment, which can reduce the monthly figure while increasing the total, depending on the pricing and term.
Both matter, and there is no right answer for every business. Paying more in total for breathing room may be a reasonable decision in some situations, as long as it is a conscious one.
How do you avoid double-counting fees?
If a fee is added to the new loan, it is already inside the total repayable figure the lender quotes. Adding it again as an upfront cost would overstate the price. If the fee is paid separately from your own funds, add it to the total. The comparison tool below asks which applies.
What risks are not about price?
Security can widen: a new lender may take a debenture or a charge over assets that were previously unencumbered. Personal guarantees may be new, larger, or harder to release. Covenants may require reporting or financial ratios that the business must maintain.
There is also behavioural risk. Consolidation frees up headroom on any revolving facilities that were repaid. If those are used again, the business can end up with the new loan and the old debts.
- Wider security or new personal guarantees
- Covenants and reporting obligations
- Variable pricing that may change during the term, if applicable
- Re-borrowing on cleared facilities
- Loss of flexibility if the new product cannot be overpaid without charge
How do my own figures compare?
An illustrative tool using only figures you enter. It assumes no rates, is not a quote, and does not assess affordability or eligibility. Enter 0 for a confirmed nil fee; a blank or invalid figure is not treated as zero. Figures stay in this tool and are not included in your enquiry.
Total cost view
Enter valid remaining payments, new total repayable and upfront fees, then confirm how exit charges are counted.
Monthly cash view
Enter both monthly figures.
Illustrative only. Fees added to the new loan are counted once, inside its total repayable. Results ignore timing of payments, tax and any variable pricing. Check every figure against written documents from lenders.
Cost comparison inputs to collect
- Written settlement figure for each existing debt, including any exit charge
- Remaining total payable on each existing debt if you do not switch
- Total repayable under the proposed new agreement
- Every fee, and whether it is paid upfront or added to the loan
- Current and proposed monthly repayment
When should you not borrow to refinance?
Be candid with yourself. Refinancing is probably the wrong move if:
- Accepting an offer judged only on its monthly figure
- Switching where exit charges plus new fees exceed the total saving
- Consolidating revolving facilities you are likely to draw on again
Free, independent help is available from Business Debtline. Check its eligibility and remit for your business.
General information, not financial, legal or tax advice. This page explains concepts in a UK context. Whether any option is available, and on what terms, depends on the lender, the specific agreement and your business's legal structure. Sorbus Finance is a broker, not a lender. Read our initial disclosure and commission disclosure.
Frequently asked questions
Is a factor rate the same as an interest rate?
No. A factor rate expresses a fixed total cost as a multiple of the amount advanced and is not directly comparable to an APR or annual interest rate. Compare total amounts repayable instead.
Will repaying early always save money?
Not always. Some products charge a fixed cost regardless of when you repay, and some agreements add early settlement charges. Check the agreement and request a written figure.
Is the comparison tool a quote?
No. It uses only the figures you enter, assumes no rates and does not assess affordability or eligibility. It is a way to structure your own comparison.
Prefer to talk it through?
Leave your details to request a discussion about your borrowing. This form is an enquiry, not a loan application. Ask the adviser what consent and credit checks would be needed before a lender application proceeds.