The main SME refinancing options in the UK are renegotiating with your current lender, consolidating debts into a new term loan, a government-backed facility under the Growth Guarantee Scheme, asset or invoice-based finance, and short-term property bridging. Refinancing is worth it when it lowers the total cost, makes repayments fit your cash flow, or frees up security, so compare the full cost in pounds, including exit fees on the old debt.
Many small businesses carry debt that made sense when they took it on but fits badly now. A short loan with heavy monthly repayments, several facilities from different lenders, an overdraft that has quietly become permanent, or a bridging loan that needs an exit. Refinancing means replacing some or all of that debt with something better suited to where the business is today.
This guide sets out the common SME refinancing options in the UK, when each tends to fit, and the checks to run before you switch. It draws on guidance from the British Business Bank and on what lenders publish about their own products.
Five refinancing routes compared
| Route | What it does | Often suits | Main thing to check |
|---|---|---|---|
| 1. Renegotiate with your current lender | Changes the term, rate or structure of existing debt | Businesses with a good repayment record | Arrangement fees and any change to security |
| 2. New term loan to consolidate | Pays off several debts with one loan over a set term | Businesses juggling multiple facilities or short, expensive loans | Early repayment charges on the old debts |
| 3. Growth Guarantee Scheme facility | Lending from an accredited lender with a 70% government guarantee to the lender | Viable smaller businesses a lender might otherwise decline | You remain 100% liable for the debt |
| 4. Asset or invoice-based finance | Raises money against equipment, vehicles or unpaid invoices | Businesses with valuable assets or a large sales ledger | How costs scale with usage |
| 5. Property bridging finance | Short-term loan secured on property | A refinance needed quickly, with a clear exit | Exit route, interest structure and loan to value |
When is refinancing worth considering?
Refinancing tends to make sense in four situations. First, when monthly repayments are squeezing cash flow, and a longer term would make them manageable. Second, when you have several facilities and want one repayment and one relationship. Third, when the business has grown stronger since the original loan, so it may qualify for better terms. Fourth, when a short-term facility, such as a bridging loan, is coming to the end of its term and needs a longer-term replacement.
It is less likely to help if the underlying business is losing money. Spreading debt over longer can lower monthly payments while raising the total cost, which only buys time. Be honest about which situation you are in.
1. Renegotiating with your current lender
The simplest first step is a conversation with the lender you already have. If you have kept up payments, they may extend the term, change the repayment profile or move an overdraft onto a term loan. There is no new lender to satisfy, though there may be arrangement fees and new paperwork.
If your bank declines, ask about the Bank Referral Scheme. The British Business Bank explains that if a smaller business is turned down for finance by one of the participating banks, the bank must offer a referral to one of three designated finance platforms, which may help find funding from alternative providers. The scheme is for businesses with a turnover under £25m and a UK address.
2. A new term loan to consolidate debt
A single term loan can pay off several smaller debts, leaving one fixed repayment over an agreed period. This is where specialist and non-bank lenders often compete with banks, sometimes deciding on trading performance and cash flow rather than credit score alone.
As an example of what to look for, Elara Advisory, a private credit firm working with UK and UAE businesses, lists SME finance from £25k to £500k over 12 to 60 months for working capital, growth funding and refinancing. It says an underwriter reviews every case personally, that it aims to give an indicative offer within 24 hours, and that enquiries use a soft credit search only, with a hard search only if you go ahead. It says it typically asks for 6 to 12 months of business bank statements, recent filed or management accounts and ID for all directors. It is registered in the United Arab Emirates, so ask which law will govern your agreement.
Before consolidating, get settlement figures for every debt you plan to repay, including any early repayment charges, and add them to the cost of the new loan.
3. The Growth Guarantee Scheme
The Growth Guarantee Scheme, which succeeded the Recovery Loan Scheme in July 2024, is delivered through accredited lenders. According to the British Business Bank, it can generally support facilities of up to £2m, gives the lender a 70% government-backed guarantee, and can be used for any legitimate business purpose, provided the business can afford the extra debt. It supports term loans, overdrafts, asset finance, invoice finance and asset-based lending.
Two details matter. The guarantee protects the lender, not you: the borrower always remains 100% liable. And personal guarantees can still be taken at the lender's discretion, although a principal private residence cannot be taken as security under the scheme. The British Business Bank lists turnover eligibility at up to £45m, and says increases to turnover limits and terms announced in July 2026 are being put in place with lenders. Ask an accredited lender whether your refinance fits the scheme.
4. Asset or invoice-based finance
If the business owns valuable equipment or vehicles, or waits a long time to be paid by customers, you may be able to raise money against those assets instead of borrowing unsecured. Invoice finance releases cash tied up in unpaid invoices, which can replace an overdraft used to bridge slow payers. Asset refinancing raises funds against equipment you already own.
Costs often depend on how much you use the facility, so model a busy month and a quiet one before you commit.
5. Property bridging finance
Bridging is short-term lending secured on property. It is sometimes used to refinance quickly, for example to clear a loan that is due before a longer-term mortgage or sale completes. Lenders focus on the property's value and your exit strategy. The private credit firm mentioned above, for instance, lists bridging from £75k to £5M over 1 to 24 months, with up to 75% loan to value considered and rolled-up or serviced interest options.
Bridging is usually more expensive than long-term borrowing, so it only makes sense with a clear, realistic exit.
Personal guarantees: read before you sign
Many refinancing offers for SMEs need a personal guarantee from directors. The British Business Bank describes this as a legally binding agreement that makes the director personally liable if the business cannot repay, and notes that some lenders ask for the full loan amount while others ask for as little as 20%. It recommends getting independent legal advice first. If you are replacing a loan without a guarantee with one that has a guarantee, that is a real change in your personal risk.
A refinancing checklist
- List every current debt with its balance, rate, remaining term and settlement figure.
- Ask for early repayment charges in writing.
- Get the total cost of the new facility in pounds over its full term.
- Compare monthly repayments with a realistic cash flow forecast.
- Check whether a personal guarantee or new security is needed.
- Ask whether the first credit check is soft or hard.
- Check the lender's regulatory status and legal jurisdiction.
Frequently asked questions
Can I refinance a business loan early?
Usually, but many loans carry early repayment charges. Ask your current lender for a settlement figure before comparing new offers.
Will refinancing hurt my business credit score?
Applications can involve credit searches. Some lenders use a soft search at enquiry stage, which does not leave a footprint, and only run a hard search if you proceed. Ask before you apply.
Can the Growth Guarantee Scheme be used for refinancing?
The British Business Bank says GGS finance can be used for any legitimate business purpose if the business can afford the extra debt. Decisions are made by each accredited lender, so ask them directly.
Is a longer loan always better?
No. A longer term lowers monthly payments but usually raises the total interest paid. Choose the term your cash flow needs, not the longest available.
Sources
- British Business Bank: Growth Guarantee Scheme
- British Business Bank: What is the Bank Referral Scheme?
- British Business Bank: A guide to personal guarantees
- FCA: Financial Services Register
General information only, not financial advice. Business finance is credit and must be repaid; secured finance may put property at risk. Lender details were taken from their own websites, and scheme details from the British Business Bank, in October 2026. Take independent advice before you refinance.