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When refinancing a commercial loan makes sense
Refinancing is worth pursuing when market rates have moved materially since origination, when your company's credit profile has strengthened (higher turnover, better margins, cleared historic debt), or when the existing facility no longer fits the business — too short a term, too restrictive covenants, or a lender whose service has deteriorated.
It also arises practically when a company needs to release equity from assets, extend a term to reduce monthly payments, or consolidate multiple facilities into a single clean obligation.
The breakeven calculation
The key arithmetic is: total cost of staying on the existing facility for its remaining term versus total cost of settling early and taking the new facility (including ERC, arrangement fee, legal costs, and any broker fee on the new deal). If the saving over the remaining term exceeds the exit costs within a period your company can tolerate, refinancing is financially sound.
Model conservatively: include the full ERC, assume arrangement fees at the upper end of the lender's range, and discount any projected rate savings that are variable rather than fixed. Figures here are illustrative; your actual costs will depend on your specific contract terms.
What a new lender will assess
A refinancing lender treats the application similarly to a new origination. They will review your latest filed accounts, current management accounts (often last 3–6 months of bank statements), and the repayment conduct on the facility being replaced. Strong conduct — no missed payments, no covenant breaches — is your most persuasive document. Request a conduct reference letter from your outgoing lender before you apply.
Sequencing: offer before settlement
Never serve an early settlement notice on your existing lender until you have a formal written offer from the replacement lender. Settlement notices often trigger a fixed window (e.g. 28 days) within which the redemption must complete. If the new deal slips, you may face late-settlement interest, re-booking fees, or in the worst case, lose the new offer entirely.
Frequently asked questions
Can I refinance with the same lender?
Yes — some lenders offer refinancing within the existing relationship, particularly if you are a good-performing borrower. This can reduce transaction costs. However, it removes competitive tension from the negotiation, so benchmark externally before accepting an in-house refinance offer.
Does refinancing appear on my company credit file as a new application?
Each new credit application typically generates a search on the company credit file. Multiple searches in a short period can be visible to future lenders. Where possible, consolidate your lender approaches to a narrow window — or use a broker who can approach lenders on a soft-search basis.
Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.