As an Australian business owner, you’re always looking for ways to improve your finances, and one of the tools that’s gaining popularity is business loan refinancing. Consolidating or refinancing business debt can reduce monthly payments, free up cash for urgent business needs, and potentially save funds for the business.
Let’s get into why business loan refinancing might be the key to unlocking your business growth and how you can use this strategy to take your business to the next level.
What is Business Loan Refinancing?
Business loan refinancing is replacing an existing business loan with a new one, usually with better terms. This can be lower interest rates, longer repayment terms or a combination of both. The aim is to reduce your debt burden and free up capital for growth initiatives. By restructuring your debt you can potentially save thousands over the life of the loan and redirect those savings into business expansion, equipment upgrades or other strategic investments.
Business loans that can be refinanced
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Term Loans: Traditional business loans with a fixed term and regular repayments.
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Equipment Loans: Loans to purchase business equipment.
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Commercial Property Loans: Loans to purchase commercial property.
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Business Lines of Credit: Revolving credit lines that businesses can draw from as needed.
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Invoice Financing: Loans based on unpaid invoices.
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Unsecured Business Loans: Loans that do not require collateral and offer a high borrowing limit.
Know what type of loan you have and what you want to refinance into. Our team can assist with this.
The Australian Business Lending Market – June 2025
The Australian business lending market has experienced significant changes throughout 2024 and into 2025, influenced by monetary policy adjustments, economic recovery patterns, and evolving lender attitudes toward risk.
The benchmark interest rate as a June 2025 is 3.85%, representing a notable shift in direction from the rate hikes seen in 2023/2024. Commonwealth Bank reduced interest rates by 0.25% per annum (p.a.) on eligible business lending products in February 2025, following the Reserve Bank of Australia’s (RBA) decision to decrease the official cash rate by 0.25% p.a. This recent rate reduction has created a more favourable environment for business loan refinancing, particularly for businesses that secured loans during the higher rate period of 2023-2024 (note that rates will vary depending on loan size, security offered and the business’s credit profile).
The lending environment has also become increasingly competitive in 2025, with traditional banks, credit unions, and alternative lenders actively competing for quality business customers. This competition has resulted in more flexible lending criteria and innovative loan products designed to meet diverse business needs, resulting in a relatively open lending environment for businesses that qualify. But with 43% of businesses still not able to get a business loan financing approval, the need to present a strong case when applying for refinancing is still required. Proof of existing debt arrangements, such as loan statements, and a bank loan business plan is often required as part of the refinancing application process.
What’s influencing the Australian lending market interest rate in June 2025
Several things are shaping business lending in Australia:
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Monetary Policy Normalisation: The RBA’s recent rate cuts signal a shift toward supporting economic growth while maintaining inflation control.
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Technology Integration: Fintech innovations continue to streamline application processes and improve loan accessibility for small and medium businesses.
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Risk Assessment Evolution: Lenders are increasingly sophisticated in their risk assessment, considering factors beyond traditional credit scores, including cash flow patterns and industry-specific trends.
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Government Support Programs: Ongoing government initiatives continue to support small business lending, creating additional opportunities for refinancing.
Understanding these will help you navigate the refinancing process and know when to go for better loan terms.
Benefits of Business Loan Refinancing
Refinancing your business loan can offer more than just cost savings. Let’s dive in:
Lower Interest Rates
One of the main reasons to refinance is to get a lower interest rate. Even a small reduction in your interest rate can save you a lot of money over the life of the loan. For example if you have a $500,000 loan with a 7% interest rate and 10 year term, reducing the rate to 6% could save you over $30,000 in interest over the life of the loan. Additionally, you may have the option to switch from a variable-rate to a fixed-rate loan for more predictable payments.
More Cash Flow
Refinancing can give you lower monthly payments either through a lower interest rate or by extending the loan term. This gives you more cash for day to day operations or to invest in growth opportunities. More cash flow means you have the flexibility to grab new business opportunities, weather economic downturns or just reduce financial stress.
Debt Consolidation
If you have multiple loans or credit lines, refinancing can consolidate them into one easy payment. This will simplify your financial management and potentially reduce your interest costs. Consolidation can also improve your credit utilisation ratio which may positively impact your business credit score.
More Capital
With some refinancing options you can borrow more than the balance of your your current loan, giving you extra funds for business growth. This is especially beneficial if your business has grown and increased in value since you took out the original loan as you may be eligible for a larger loan now.
Switch Lenders
If you’re not happy with your current lender refinancing allows you to explore other options that might be better for you. This could mean moving to a lender with better customer service, more flexible terms or additional services that benefit your business.
Tax Benefits
While interest on business loans is generally tax deductible, refinancing may have additional tax benefits. For example if you use some of the refinanced amount for business improvements, those expenses may be tax deductible. Always consult a tax professional to understand the implications for your business.
Reassess Your Business Finance Strategy
Refinancing is a great opportunity to review your overall business finance strategy. This can include reviewing your debt structure, cash flow projections and aligning your finance with your long term business goals.
Is Refinancing Right for You?
While the benefits are great refinance isn’t right for every business in every situation.
Here are the scenarios where refinancing might be beneficial.
When to Refinance
- Your Business is Healthier: If your revenue has grown or your credit score has improved since you took out the original loan you may be eligible for better terms.
- Interest Rates Have Fallen: If interest rates have changed significantly since you took out the original loan refinancing could save you a lot.
- You’re Finding Current Payments Tough: If cash flow is tight and you’re struggling to meet your current loan repayments refinancing to lower your monthly payments can be a big help.
- You Need More Capital for Growth: If your business is ready to grow but lacks the funds refinancing can provide the funds you need.
- You Want to Change Your Loan: Maybe you want to switch from variable to fixed interest rate or vice versa based on your risk tolerance and market forecasts.
- Your Current Loan is Unfavourable: If your current loan has high interest rate, extra fees or other unfavourable terms refinancing can help you get a better deal.
Things to Consider Before Refinancing
While refinancing can be great it’s important to consider everything before you do:
- Costs of Refinancing: Make sure you factor in any application fees, valuation fees or early repayment penalties on your current loan.
- Your Business Long Term Goals: Ensure the new loan terms align with your overall business strategy and financial goals.
- The Balance of Your Current Loan: If you’re nearly paid out your current loan the costs of refinancing might be more than the benefits.
- Your Business Credit Score: If your credit score has dropped since you took out the original loan you may not be eligible for better terms.
- Market Conditions and Interest Rate Direction: Check if the current market is right for refinancing and try to forecast future trends.
- Security for the New Loan: Make sure you’re comfortable with the collateral required for the new loan.
How to Refinance Your Business Loan: The Refinancing Process
If you’ve decided you’d like to explore refinancing, our team here at Smart Business Plans can walk you through the steps to make it as easy as possible.
Review Your Current Loan
Firstly, we review your current loan in detail. Key things to note:
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The current interest rate
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The balance
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The term
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Early repayment fees or penalties
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Balloon payments or other conditions
This will be our base line to compare new loan offers and calculate the savings.
Check Your Business’s Financials
Before we approach lenders your behalf, we’ll review your business’s financials together. This means:
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Updating or creating your financial statements (balance sheet, profit and loss statement, cash flow forecast)
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Review your business and personal credit scores
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Prepare financial projections for the next 3-5 years
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Calculate your debt to income ratio
Having this info ready up front will speed up the application process, and help you present a stronger case to lenders.
Lenders and Loan Options
We access our marketplace of more than 60 lenders to ensure we get all the best options on the table to review. This means:
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Traditional banks
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Niche or specialised lenders
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Credit unions
We’ll walk through the pros and cons of different options, and align on the best one to move forward with.
Apply
Once we’ve selected an option, we’ll manage the application process for you. These are the typical documents you’ll need:
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Business and personal tax returns for the last 2-3 years
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Financial statements
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Business plan and cash flow projections
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Details of existing loans and other debt
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Business structure and ownership details
We’ll connect with the lender to ensure everything is received and set.
Negotiate
With all the information at hand, we’ll push and negotiate on your behalf to get better:
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Interest rates
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Loan terms
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Fees
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Prepayment penalties requirements
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Collateral requirements
As we do this all the time and have strong personal relationships, in many cases we can get you better terms that if you applied directly.
Review and Accept
Review the new loan documents and ensure you are across:
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The total cost of the loan
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Repayment flexibility
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Lender reputation and service
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Additional services or benefits
Take your time and make sure everything makes sense before you sign. Ask for clarification on anything you’re unsure about.
Potential refinancing traps to watch out for
Refinancing can be great but there are some traps to be aware of:
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Extending the Loan Term Too Long: While this will lower your monthly payments it may cost you more interest over the life of the loan.
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Fees: Make sure you know all the costs of closing your old loan and opening the new one.
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Just the Interest Rate: While important it’s not the only thing to consider. Look at the total cost and terms of the loan.
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First Offer: Don’t settle for the first offer you get. Shop around to get the best deal.
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Fine Print: Make sure you read all the terms and conditions including any prepayment penalties or variable rate conditions.
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Overestimating Your Business’s Financials: Be honest about your business’s financial situation so you don’t take on a loan you can’t afford.
Case Study: Business Loan Refinancing
To show you the benefits of refinancing let’s look at Smith’s Furniture, a medium sized furniture retailer in Sydney.
Smith’s Furniture took out a $750,000 loan 5 years ago to fund an expansion. The loan had a 10 year term with an interest rate of 7.5%. Their monthly payments were $8,852 and they still owed $513,000. After 5 years of steady growth and improving their credit score Smith’s Furniture decided to refinance. They got a new loan for the remaining $513,000 with a 5 year term and 5.5% interest rate. Their new monthly payment is $9,760. This is slightly more than their old payment but they’ll pay off the loan in half the time and save around $62,000 in interest over the life of the loan. Plus with the extra cash flow from their expansion they can easily manage the higher monthly payments and reduce their total debt by half.
Ready to get started?
Business loan refinancing can be a winner for Australian businesses looking to get their finances in order and grow. By taking advantage of the market and your improved business profile you can reduce costs, improve cash flow and position your business for the future.
Every business is different. While refinancing can be great, you need to consider your specific situation and long term goals. Get a financial advisor or accountant to advise if refinancing is right for your business.
In the world of business finance being informed and proactive with your debt can be a big advantage. Whether you want to reduce costs, fund growth or simply get your finances in order business loan refinancing could be the key to unlocking your business’s full potential.
Footnotes
Reserve Bank of Australia. (2023). Lending Rates. https://www.rba.gov.au/statistics/interest-rates/
Australian Bureau of Statistics. (2022). Characteristics of Australian Business. [https://www.abs.gov.au/statistics/economy/business-indicators/characteristics-australian-business/latest-release]
https://www.ausbanking.org.au/wp-content/uploads/2022/11/SME-lending-report-2022.pdf
