What Is Business Debt Consolidation? Plain-English Guide
- Business debt consolidation replaces multiple loans with one — one payment, one lender, one set of terms
- Monthly payments usually fall, but total interest paid may increase if the term is extended
- Secured loans (against property) have lower rates; unsecured loans are faster but more expensive
- Works best when the business is profitable but weighed down by expensive or complex debt
- Business loans are FCA-regulated — always use an FCA-authorised broker
What is business debt consolidation?
Business debt consolidation is straightforward: you take out one new loan that pays off all your existing ones. Instead of four separate payments going to four different lenders every month, you have one direct debit, one interest rate, one lender to deal with.
The aim is usually to reduce the total amount leaving your account each month — either because the new loan has a lower rate than some of your existing debt, or because you're spreading the payments over a longer term. Many businesses achieve both.
How it works, step by step
- You apply to a lender or broker for a consolidation loan — the loan amount covers what you currently owe across all loans and credit lines
- The lender assesses your application — they look at your credit history, trading history, revenue, existing debt levels, and whether you have security to offer
- If approved, the loan is used to repay your existing debts — the lender pays off your old loans directly, or you receive the funds and repay them yourself
- You now have one lender, one monthly payment, one set of terms
- Your monthly payment is lower than the combined total you were paying before (usually)
See what a consolidation loan might cost for your total debt — and how much you could save each month.
Calculate your saving →What debts can be consolidated?
Most commercial debts can be included in a consolidation loan:
- Business term loans — standard fixed-term loans from banks or alternative lenders. Most are straightforward to consolidate, but check for early repayment charges (ERCs) first.
- Merchant cash advances (MCAs) — these can be consolidated, but the effective exit cost can be high. See our dedicated MCA guide.
- Business credit cards and overdrafts — yes, these can be included. Particularly useful if cards have high interest rates (18–25% APR).
- Asset finance — sometimes. Depends on the lender and whether the asset is the security. Some asset finance agreements have early settlement clauses that make exit expensive.
- Bounce Back Loans — yes, but the 2.5% rate is hard to beat. Only worth including if the overall deal makes sense.
- HMRC (the UK tax authority) debt / tax arrears — different route. HMRC offers a "Time to Pay" arrangement where you agree a repayment schedule directly with them. This is separate from commercial consolidation.
What business debt consolidation costs
Three things to factor in — most people only think about the first one.
1. Interest rate on the new loan
Varies significantly. Typical ranges in 2026:
- Unsecured consolidation loan: 8–25% APR
- Secured against property (first charge): 6–12%
- Secured (second charge): 10–18%
- Specialist/alternative lenders: 12–30% (for higher-risk profiles)
Your actual rate depends on your credit score, trading history, loan amount, term, and whether you can offer security. These are ranges — not quotes.
2. Arrangement fee
Typically 1–2% of the loan amount, charged by the lender or broker. On a £100,000 loan, that's £1,000–£2,000. Some lenders absorb this from their commission; others charge it to you. Always ask before you sign.
3. Early repayment charges on your existing loans
This is the one people forget. If your existing loans have ERCs, you may pay 1–6 months' interest to exit them early. Add this to your total cost calculation before deciding whether consolidation makes financial sense.
Secured vs unsecured consolidation
This is the most important decision in the consolidation process.
| Feature | Unsecured | Secured (property) |
|---|---|---|
| Typical rate | 8–25% APR | 6–12% APR |
| Max loan size | ~£250,000 | £2m+ |
| Speed | 1–2 weeks | 4–8 weeks |
| Risk | No asset at risk | Property at risk if you default |
| Credit requirements | Higher | More flexible (asset reduces lender risk) |
If you own commercial or residential property, using it as security unlocks significantly lower rates. But your property is at risk if you can't repay — that's a serious decision, not one to make quickly.
Pros and cons
Pros
- One monthly payment instead of several — less admin, less stress
- Usually lower total monthly outgoing — frees up cash flow
- One lender to deal with — simpler to manage
- May reduce interest rate if moving from expensive short-term debt
- Can include MCAs and credit cards alongside term loans
Cons
- May cost more in total interest if you extend the term significantly
- Early repayment charges on existing loans can be substantial
- Secured loans put your property at risk
- Not a quick fix — takes 1–8 weeks to arrange
- Does not solve an underlying business problem — only restructures the debt
Worked example
Before consolidation:
- Term loan: £50,000 outstanding, 12% APR, £1,110/month, 5 years remaining
- Merchant cash advance: £30,000 outstanding, effective 60% APR, £1,600/month (estimated)
- Business credit card: £20,000 balance, 22% APR, £500/month minimum
- Total monthly outgoing: £3,210
After consolidation (secured, 8% APR over 5 years, £100,000 loan):
- Monthly payment: £2,028
- Monthly saving: £1,182
- Total interest over 5 years: £21,680
- Arrangement fee: £1,500
- ERC on existing loans: ~£800
Outcome: Monthly cash flow improves by over £1,000. The total interest paid over the 5-year term is higher than if the MCA and credit card had been paid off quickly — but the business needed cash flow relief now, not minimum interest over time. The £2,300 upfront costs are recovered in about 2 months of payment savings.
Who qualifies for business debt consolidation?
- UK-registered business — limited company, LLP, partnership, or sole trader
- Trading for 12+ months — most lenders require this; 2+ years for better rates
- Total debt typically £25,000–£2 million — below £25k, personal finance options may be simpler
- Not currently in administration or liquidation
- Some evidence of ability to repay — recent bank statements, accounts, or management accounts
- Unresolved County Court Judgements (CCJs) — makes it harder, but specialist lenders may still consider you (at a higher rate). A CCJ is a court order confirming a debt is owed — satisfied (paid) CCJs are treated more favourably than active ones.
Not sure if you qualify? Our guide specifically covers consolidation with bad credit.
Frequently asked questions
Talk to a specialist broker
We'll connect you with FCA-authorised commercial finance brokers who handle business debt consolidation. Free, no obligation.
Sources
- British Business Bank — Small Business Finance Markets Report 2024/25
- Bank of England — Official Bank Rate (April 2026)
- FCA — Consumer Credit and Lending Regulation, 2024
- LoanLens market rate monitoring, April 2026
Related guides
Disclaimer: This guide provides general information only. Business loans are regulated by the FCA. This is not financial advice. Always seek advice from an FCA-authorised commercial finance broker. If you are in financial difficulty, Business Debtline offers free, confidential advice on 0800 197 6026. Last updated: April 2026.
LoanLens provides information and educational tools to help you understand your business finance options. We do not provide financial advice. Calculator results are estimates based on indicative market rates — they are not quotes or guarantees. Actual costs depend on your business circumstances, sector, and provider terms.