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Refinancing your business loan

Make sure you're getting the best deal possible.

On this page

  • Refinance your debt to save you money
  • What a letter of facilities is, and why it's useful
  • Decide if it's worth switching banks

Banks and other financial institutions are vital to your business. Even if you're satisfied with the service quality, you should still meet with your financial institution once a year to discuss your banking needs, e.g. where they could improve their products and services. If you're not happy, shop around for a better deal before leaving.

You don't have to do everything through the one financial institution - many businesses split their banking between two or more financial institutions for more control.

Refinancing your debt finance may involve:

  • changing lending institutions (but retaining the same debt products)
  • funding the business from different debt products (with the same or a different lender)
  • combining debt into a single facility or product
  • increasing or decreasing the total amount of the borrowing as part of the refinancing
  • changing the repayment amount or timing
  • increasing or decreasing the security offered to the lender/s.

Use the following process to review accounts and facilities:

Step 1. Create a list of all business accounts

In this list, you should include what the account is used for and its account details (such as branch, BSB, account number, account name). Make note of any special arrangements with each account such as automatic transfers. Include all social club accounts, old businesses, branch accounts, petty cash accounts and special purpose accounts. You can get this information from your account statements or by asking the financial institution.  You might be surprised at the number of accounts you have. 

Step 2. Get a letter of facilities

Build a complete picture of all your banking facilities by requesting a letter of facilities from all the banks you deal with.

In your letter, you should ask your banks to make sure they detail all your facilities, including:

  • credit or purchasing cards
  • merchant, trade and lease facilities
  • internet banking
  • BPay
  • cheque cashing
  • any information (such as loan break fees, early termination fees etc) on loans that you have.

Step 3. Select your top three preferences

How you select can be based on any criteria such as the financial institution you have the most transactions with, the quality of service, friendly staff, convenience, or who can offer the best prices.  Knowing and having a good relationship with the account manager is often a good reason to include a financial institution in your list.

Use Infochoice's Small business loan tool to see who currently has the best business loan rates for your needs.

Step 4. Meet with your current financial institution

Once you collect the information meet with them to give them the first chance to improve their prices and/or service. With the staff person, do a detailed review of your business banking procedures.  If you run a retail business the areas to review are loan fees, interest margins, merchant facilities, and cash handling.

Often your circumstances have changed or business banking products have changed (or both). This review will help you find if a better or cheaper service has become available. Be open and disclose all the information (including accounts you have elsewhere). A financial institution will usually give you its best rates if you do all you banking through them.

When meeting with your current financial institution, you should prepare and take both a profit and loss budget and a cashflow forecast to show them the projected financial position of your business.

Step 5. Review your current financial institution's offer

If the financial institution offers you improved pricing and service levels, you may wish to stay with them and stop the review. If you decide to stay, ask for a letter of agreement including the renegotiated fees, charges and service levels offered. If possible, negotiate these new terms for one to three years.

Step 6. When to meet with alternative financial institutions on your list if you're unhappy

It will cost you time and money to move to a new financial institution, so you'll have to be sure it really offers much better prices, products or service.
Before you change, consider these questions:

  • will they sign an agreement on the pricing for three years?
  • will your business pay extra to switch to a new financial institution?e.g. what it will cost to notify customers and suppliers, change deposit and cheque books
  • does the new institution have good service? Ask your customers or suppliers who have an account there about their experience.

Give preference to the financial institution that allows you to meet with the bank staff other than the account manager such as the manager or regional manager.