Can you combine business debts into one loan?
One repayment looks easier than several
A trade business pays a card balance, an equipment facility and a short-term loan on different dates. The owner wants to combine them so there is only one payment to remember. That could simplify administration, but it could also turn a near-finished equipment loan into years of further repayments. The decision needs to compare the debts being replaced with the complete proposed arrangement.
Start with a complete debt schedule
Record each lender, payout balance, interest basis, fees, repayment dates and remaining term. Include security and guarantees. Ask for current payout figures rather than relying on last month’s statement.
Separate overdue amounts from debts already being paid comfortably. Combining everything is not automatically better than changing one unsuitable facility. Understanding each existing loan lets you test whether consolidation improves the position or simply makes it look tidier.
Compare total cost as well as regular payments
Request a written offer showing establishment costs, discharge fees, interest, ongoing charges and any final lump sum. Calculate the total cash committed over the proposed term.
A longer loan may reduce the monthly payment while increasing the total cost. Check whether a variable rate or other condition could change the apparent saving. The comparison should show what happens after the immediate relief, not just the first payment.
Check whether the risk moves elsewhere
Identify assets and guarantees required by the new lender. A consolidated loan secured against property can create a different exposure from the facilities it replaces. Obtain advice on releases of old security as well as new obligations.
Also decide what happens to repaid credit facilities. If balances build up again, the business could end up with the consolidation loan and a fresh version of the old debt. Assign responsibility for closing or controlling facilities as agreed.
Make the cash forecast the final test
Place the new repayments beside realistic receipts and ordinary operating costs. Test a delayed customer payment and a quieter period. If the arrangement still requires regular emergency borrowing, it has not solved the underlying issue.
Consider whether debt negotiation, cost changes or restructuring would better address the pressure. Business.gov.au lists funding alternatives; choosing among them requires the business’s actual figures. Simpler administration is useful, but affordability and risk should decide the outcome.
Compare the complete debt position
Build a debt-by-debt comparison using current payout figures.
Add every fee, security change and final payment to the new-loan assessment.
Test the proposed repayment under slower trading and plan controls for cleared credit accounts.
Call CRP today about business debt pressure and coordinated restructuring support.