Check the security changes in a cheaper private-loan refinance

A lower rate may come with different commitments

A new lender offers to replace expensive private debt at a lower quoted rate. Before accepting, compare what assets and personal obligations the proposed documents involve. A more attractive repayment figure does not explain the whole transaction. Obtain independent legal and accounting advice so the decision reflects the new commitments as well as the cost of exiting the old facility.

Map the parties on each facility

Imagine a business currently borrowing in its company name while the refinance proposal also seeks a director's guarantee and property security. List the borrower, proposed guarantors and assets referred to in each set of documents. Do not assume a familiar lender name or a broker's summary means the terms are unchanged apart from the interest rate.

Have unclear terms explained

business.gov.au recommends understanding contract terms and seeking legal advice where needed. Give the lawyer the complete existing agreement and proposed finance documents. Ask for an explanation of the obligations being added, removed or retained. Keep draft documents clearly marked; an early indication of terms may differ from the documents eventually offered for signature.

Source: business.gov.au: Prepare a contract

Identify whose advice is needed

In the example, the company and director may face different consequences. Ask the lawyer about appropriate independent advice and conflicts before anyone signs. Do not treat one person's enthusiasm for lower company payments as consent from every person whose property or obligations may be affected. Keep authority, understanding and formal execution requirements with the qualified advisers.

Check the proposed release of existing security

Ask how the old facility will be paid out and what evidence will confirm the agreed releases or discharges. A transfer of funds alone should not be assumed to complete every required step. Keep the old lender's requirements, the new lender's conditions and the proposed settlement sequence visible so the advisers can identify any unresolved dependency.

Compare the whole outcome before committing

Assess cost, repayment timing, conditions and security together. If the business cannot meet its debts, seek insolvency advice rather than relying solely on refinancing discussions. A clear comparison may show that a proposal is useful or that its additional commitments need reconsideration. The decision should rest on understood documents, not just the apparent saving in the headline rate.