Refinancing a Commercial Loan

spreadsheet and calculator on a desk for examining refinancing options
spreadsheet and calculator on a desk for examining refinancing options

Increase in loan repayments

We’ve all seen the doom and gloom in the print and digital media around the cost of borrowing and have probably experienced an increase in our monthly commercial loan repayments, unless on a fixed rate loan, which despite the initial higher cost of borrowing is now paying dividends.

As we know, the increase in the current cost of borrowing is in theory to curb inflation.  Whilst this is a laudable aim, it doesn’t take away from the fact that in the medium term, you’ll be paying approx. 20% more each month, over a typical 20-year loan.

When will the Bank of England reduce the base rate?

The $64,000 question is ‘when will the Bank of England Base Rate reduce?’ The answer is probably when inflation returns to the Bank’s target of 2%. This could be some time, with analysts predicting at least 3 to 5 years before the inflationary supply side chain returns to normal, as too many people are chasing too few goods with energy, petrol, diesel and food stuffs all being key drivers to supply chain inflationary pressures.

This begs the question…

What can I do about my commercial loan repayments in the short to medium term?

What can you do in the short to medium term to counter these pressures that directly impact on your ability to service your loan repayments?

The old saying “cash is king” has never been more apt.  Having liquid funds available are essential, as they provide flexibility during an inflationary period or crisis and many lenders look to your businesses’ cash flow for loan servicing. In banking terms this is known as CFADS (Cash Flow Available for Debt Servicing).

Generally, it is not declining profitability that drives a business into duress or insolvency, but the ability to service its creditors, principally bank loans and VAT liabilities, which result in cash flow duress.

As Basil Fawlty once said “I may be stating the bleedin’ obvious”, but it is generally recognised that many operators focus to much time and attention on revenue, rather than cash flow which in many ways can be seen as counterintuitive, as a top-down strategy is broadly accepted by business pundits, but there is a strong case for a bottom-up strategy, cash flow being the case in point, to avoid duress and an insolvent situation which all lenders test for.

Improve your businesses cash flow by extending the term of your existing loan.

If your existing lender isn’t sympathetic to rescheduling or extending your loan, then there are a number or lenders in the market who’ll consider the case for refinancing.

This could be on an interest only, or part interest basis over an extended period and lenders often offer a 12-month capital repayment holiday, to take you over the initial cost of the refinancing.

Refinancing your loan may help your business remain secure

Refinancing should be seen in the context of putting your business on a secure basis, as retrospective comparisons on interest rate and the cost of borrowing pail into insignificance, when your business is under threat from your creditors or indeed your own lender.


To find out more how Stewart Hindley & Partners can assist you with your commercial loan or hotel loan refinancing and cash flow, get in touch on 01488 684834 or email


Stewart Hindley
Specialist financial experts helping you secure commercial loans across the hospitality, leisure and commercial property sectors.

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