Mr's short answer
Often, yes. Consolidating several business debts into one loan can simplify repayments and sometimes lower the total cost, especially when property security can replace expensive short-term or unsecured debt. It only works if the new repayment fits your cash flow and you stop the debts building again. Add up every balance, fee and break cost first, then compare one loan against carrying on.
Key points
- Consolidation replaces several repayments with one, which is easier to manage.
- It can reduce total cost when cheaper security replaces expensive unsecured debt — but not always.
- Break and exit fees on old loans count as part of the cost.
- It fails when the old facilities stay open and fill up again.
It usually starts innocently. A short-term loan for stock, a card for fuel, a supplier account that slipped to 60 days, a GST payment that got put off “just this once”. A year later the business is paying five lenders on five different days, and the owner is spending more time juggling than trading. That’s when people ask Mr whether they can roll it all into one.
What does consolidating business debt actually do?
It replaces several debts with a single loan. On settlement day the new lender (or your solicitor) pays out the old balances, and from then on you make one repayment on one schedule.
Done well, consolidation can:
- simplify your week — one due date instead of many;
- lower the total cost, if expensive short-term or unsecured debt is replaced with cheaper secured borrowing;
- stop penalties on overdue tax from compounding;
- stretch repayments to match the life of what was funded, easing pressure on cash flow.
Done badly, it just moves the pile into a bigger single heap.
When does consolidating make sense?
Mr’s quick test — tick the ones that apply:
- You’re paying several lenders or facilities at once.
- Some of the debt is expensive short-term or unsecured lending.
- Tax is overdue and gathering penalties.
- The underlying business is sound; the trouble is the debt structure, not the trade.
- You’re prepared to close the old facilities once they’re paid out.
Four or five ticks and it’s worth a serious conversation. One or two, and a simpler fix may do.
How do I work out if it’s cheaper?
Make a simple table. Be honest with it.
| Debt | Balance today | Remaining cost if you carry on | Cost to exit now |
|---|---|---|---|
| Short-term loan | Early repayment fee? | ||
| Equipment finance | Break cost? | ||
| Business card | None, usually | ||
| Supplier arrears | Lost discounts? | ||
| IRD arrears | Penalties and interest still accruing | None to pay it off |
Add up column three and compare it with the full cost of the single new loan plus column four. If the new loan wins clearly, consolidation earns its place. If it’s close, the simplicity might still be worth it, but go in knowing that. Our what does a business loan actually cost? page explains which fees to count.
Where does IRD debt fit in?
Tax arrears are one of the most common pieces of a consolidation. Inland Revenue charges a late payment penalty of 1% the day after the due date and a further 4% on the seventh day, and use-of-money interest also applies. Clearing the balance with a loan stops that from growing, and lenders generally prefer to see IRD sorted. More detail on getting a business loan with an IRD debt.
If you’d like a specialist to look at your list of debts and tell you whether one loan would genuinely help, send a short enquiry.
Secured or unsecured consolidation?
- Unsecured consolidation can suit a smaller set of debts in a business with steady trading and decent credit.
- Property-secured consolidation suits larger totals, mixed credit, or tax arrears. Property-secured business loans run from $20,000 to $5,000,000, and a second mortgage is a common tool here — see what’s a second mortgage and when does it make sense?
How do I stop the debt coming back?
This is where consolidation succeeds or fails.
- Close paid-out facilities unless there’s a clear reason to keep one small one.
- Find the cause. Late-paying customers? Thin margins? Growth outrunning cash? Each has a different fix — our guide to growing too fast covers the last one.
- Set aside tax as you go. A separate account for GST and PAYE stops the next arrears.
- Review monthly for the first six months.
An illustrative example: five repayments into one
This is a made-up case to show how the numbers might be weighed.
A Hamilton electrical contractor has, over eighteen months, picked up:
- two short-term unsecured loans with weekly repayments;
- a business credit card carried at its limit;
- equipment finance on a van;
- GST arrears from two periods, with penalties accruing.
Every Monday, money goes out to three different lenders before the week’s wages are paid, and the owner is regularly moving money between accounts to cover the debits. The business itself is profitable — the jobs are good, the margins are fine — but the debt structure is draining the account.
A property-secured consolidation, using equity in the family home with the owner’s partner’s informed agreement, could:
- pay out both short-term loans and the card;
- clear the GST arrears directly with IRD;
- leave the van finance in place, because its rate and term are reasonable and it would cost money to break.
The result: two repayments instead of five, IRD off the list, and a longer term that matches the business’s ability to pay. The owner closes the card and one of the bank accounts so the debts can’t quietly rebuild.
When consolidation isn’t the answer
Mr will tell you straight if it isn’t. Consolidation is usually the wrong move when:
- the business is losing money month after month;
- the new single repayment would be higher than the combined current ones and cash is already tight;
- the break costs on existing loans outweigh the saving;
- the main debt is cheap and long-term already;
- there’s no willingness to close the old facilities.
In those cases, the better first step might be repricing, cutting costs, chasing debtors or talking to IRD about an arrangement.
Put your list in front of a real person
Write down what you owe, to whom, and what each costs you each month. Then tell us. There’s no credit check to ask, your situation isn’t sprayed out to multiple lenders, and a real specialist will say plainly whether one loan would help or not.
Please list your debts and any IRD arrears accurately on the form; complete figures mean the option we suggest will stand up. Ask Mr about combining your business debts.
Frequently asked questions
Can I include IRD debt in a consolidation loan?
Yes, IRD debt is often part of it. Clearing tax arrears stops penalties and interest building, and lenders generally like to see IRD sorted. We look at IRD debt case by case.
Will consolidating hurt my credit?
A new application means a credit check once you go ahead, but closing several facilities and paying on time afterwards can help your record over time. There's no credit check when you first ask us.
Do I need property to consolidate?
Not always. Smaller consolidations can sometimes be done unsecured if your trading supports it. Larger ones, or ones involving weaker credit, usually work best with property security.
What if the new loan costs more each month?
Then it may not be the right answer, or the term or amount needs a rethink. The aim is a repayment your business can carry in its quiet months, not just a tidier list of creditors.