What refinancing means
Refinancing replaces one or more existing debts with a new facility. Consolidation combines several obligations into one structure. Either can improve timing or simplify administration, but neither automatically reduces the total cost or fixes the reason the debt arose.
Start with a complete debt schedule
List each creditor, current balance, rate, fees, payment frequency, security, guarantees, arrears and the amount required to repay the facility today. Include tax obligations, supplier arrangements and any enforcement deadline.
The payout amount may differ from the statement balance because of accrued interest, discharge costs or other contractual charges.
Compare before and after
Ask how the proposed refinance changes:
- total dollars owing;
- immediate and ongoing payments;
- the expected repayment period;
- security and guarantees;
- default exposure;
- early-repayment flexibility; and
- the business’s ability to meet new tax and operating costs.
A lower monthly payment can still create a higher total cost if the debt remains outstanding much longer.
Address the underlying cause
If the debt arose from a one-off timing event, explain what has changed. If the business is consistently spending more than it receives, new finance may only postpone the problem.
Prepare a realistic plan for margins, expenses, tax, working capital and the proposed reduction or refinance of the new facility. An accountant or restructuring adviser may be appropriate.
Where HomeSec may fit
HomeSec can consider a genuine business refinance or consolidation purpose where suitable New Zealand real estate secures the facility. First- and second-mortgage options may be considered, and an approved open-term structure may provide flexibility around repayment timing.
The lending range is $20,000–$1,000,000. Every scenario remains subject to assessment, documents, security, legal work and final approval.
Do not replace affordable debt unnecessarily
If an existing bank facility is affordable and appropriately structured, replacing it with private finance may increase cost. A second-mortgage structure may sometimes allow an existing first mortgage to remain in place, but consent, priority and total debt still require assessment.
Compare the proposed facility with negotiating existing creditors, an IRD arrangement, asset sales, shareholder contributions and other realistic alternatives.