5 Ways Debt Restructure Can Benefit Your Business

Debt restructuring involves taking out a new loan or loans to pay off existing creditors. It can be an effective way to manage debts and cash flow, as well as take advantage of other products, deals and rates on the market.

At Lendfin, we offer both business and personal debt restructuring (also known as refinance). Our long-term relationships with Australia’s Big 4 Banks, as well as a multitude of smaller lenders, means that we have a good understanding the best deals across the market as well as access to discounted rates.

Below, we explain 5 ways that debt restructure can benefit your business.

  1. Consolidate all debts to a single lender. Although debt consolidation is not the only reason for restructure, it is one of the most common. Over time, small businesses tend to acquire a number of debts with different lenders, but often find that their cash flow is affected by the volume of separate repayments to be made. Consolidating all debts to a single lender helps with cash flow management as payments are due just once a month, rather than across multiple days. It also makes budgeting and payment processing much less time consuming. 
  2. Access equity or free up cash in your business. Debt restructure can allow you to access equity which can then be used to grow your business, so long as the loan to value ration stays within acceptable bank rates (this differs depending on the product and lender). Changing the loan product can help with cash flow and ensure you have access to cash to cover challenges in your business. For example, we have helped numerous clients improve their cash flow by changing from a principal & interest business loan to a line of credit facility, which allows them to access cash only when it is needed.
  3. Lower interest rates. It’s an unfortunate but well-known fact that banks do not reward customer loyalty. Although you may have been with the same bank since childhood, you will not be eligible for new customer specials or discounts on your loan rates. Debt restructure offers an opportunity to reduce your interest rate with a new lender and take advantage of special rates for new customers. The specialists at Lendfin regularly review all offers on the market, and we can help guide you to obtain a lower interest rate for both business and personal loans.
  4. Restructure to a more suitable loan facility. As your business grows and changes, so too do your financial needs. Whilst a straight business loan may have been appropriate in the start-up phase of your business, there may now be a more suitable loan product on the market. For example, a line of credit allows access to capital only when it’s needed, and asset finance is a great way to take advantage of tax benefits on loans used to finance the purchase of income-producing assets.
  5. Consolidate personal and business debts. For small to medium businesses, there is huge benefit in consolidating business and personal debts to a single lender. Whilst your accounts remain separate, you will be able to access an overall account of your financial position through a single financier, as well as transfer funds quickly and easy from business to personal accounts.

There can be costs involved with debt restructure, so it’s always best to speak to a professional who can help you ensure that you will benefit from the arrangements. Commercial lending can be complex, but the specialists at Lendfin will ensure that the structure of your loans are right for your business.