Refinancing guide · Sorbus Finance
How does business loan refinancing work, step by step?
Quick answer
Refinancing usually follows six stages: list what you owe, get written settlement figures, decide what you want to change, apply with supporting documents, review the offer against your existing costs, then complete so the new lender or you settle the old debts and any security is released. Exact steps and timings vary by lender.
What are the steps?
Step 1: List every existing debt
Record lender, product, balance, monthly repayment, end date and any security or guarantee for each facility.
Step 2: Request written settlement figures
Ask each lender for a settlement figure in writing, including any early repayment or exit charge and the date it expires.
Step 3: Decide what you want to change
Be clear on the aim: lower monthly outgoings, fewer lenders, a different term or a change in security. Decide which debts to include.
Step 4: Prepare and submit an application
Gather accounts, bank statements, debt schedule and identification. Apply to your existing lender, a new lender or through a broker.
Step 5: Compare the offer with what you pay now
Set the total repayable and fees under the offer against the remaining payments and settlement costs on existing debts, and check monthly cash impact separately.
Step 6: Complete and confirm settlement
Sign the new agreement, make sure old balances are paid exactly as settlement figures state, and obtain written confirmation that debts are closed and security released.
What are the stages of refinancing?
The steps above are the common shape of the process. Some lenders combine stages, some add their own checks such as valuations or site visits, and the order can change. Treat this as a map, not a timetable.
Who actually pays off the old loans?
It depends on the lender. Some new lenders pay existing lenders directly on completion. Others release the funds to the business, which must then settle each debt. If funds come to you, settle promptly and exactly in line with written figures, because interest may continue to accrue on old debts until they are cleared.
Direct settlement can reduce the risk of funds being diverted to other uses, which is one reason some lenders insist on it.
What happens to existing security and guarantees?
Paying off a loan does not always release related security automatically. Charges registered at Companies House may need a formal satisfaction filing, and personal guarantees may need written release. Ask each existing lender how they handle this and keep copies of confirmations.
The new lender may take its own security or guarantees. Read those documents as carefully as the loan agreement itself.
| Task | Often handled by | What to keep |
|---|---|---|
| Settling old balances | New lender or the business, depending on terms | Settlement statements |
| Releasing old charges | Existing lender, sometimes with your solicitor | Confirmation of satisfaction |
| Releasing guarantees | Existing lender on request | Written release letter |
| Registering new security | New lender | Copy of the charge or guarantee |
What should you do after completion?
Check your bank statements to confirm old direct debits or collection arrangements have stopped. Update your cash-flow forecast with the new repayment dates. Diarise any review points or covenants in the new agreement.
Completion checklist
- Settlement figures still valid on the completion date
- Confirmation that each old agreement is closed
- Old direct debits and card-split arrangements cancelled
- Security satisfaction and guarantee releases received
- New repayment schedule entered in your forecast
When should you not borrow to refinance?
Be candid with yourself. Refinancing is probably the wrong move if:
- Signing a new agreement before you have written settlement figures
- Accepting funds to the business account without a clear plan to settle each debt
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
How long does refinancing take?
It varies widely by lender, complexity and how quickly documents are supplied. Secured refinancing involving valuations or legal work usually takes longer than unsecured. Ask any lender for their own estimate rather than relying on a general figure.
Can I keep using my old facility while the refinance is processed?
Usually yes until completion, but drawing more on a revolving facility will change the settlement figure. Tell the new lender if balances change.
Do I need a solicitor?
For secured lending or where guarantees are involved, legal input is often needed or strongly advisable. For straightforward unsecured refinancing it may not be required, but independent advice on guarantees is always worth considering.
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.