To assist small businesses with this important decision, the ABA and CPA Australia have produced a fact sheet – “Refinancing Your Debt”. 

It provides a checklist of considerations which small business owners may need to examine when undertaking the cost/benefit analysis of replacing debt facilities.

CPA Australia CEO Alex Malley said it was important that businesses be aware of the options at their disposal.

“Businesses are already faced with a significant rise in operating costs in the current global economic climate, so it is important that they minimise the cost of their debt,” he said.

“There are a lot of considerations for business owners but a change in the debt arrangements, for instance, can convert short-term loans into longer-term debt which can assist cash flow and provide more working capital.”

“Importantly, businesses need to understand the costs and benefits of refinancing before setting up the new arrangements. It can be an important strategic decision for the business, so it is important that you also seek advice from your business advisors including your accountant.”
 
David Bell, Chief Executive of the ABA, said: “For many small businesses the initial financing arrangements put in place at start-up are still in place many years later.”

“For example, a company starts off with a simple overdraft facility and may arrange for several modest increases in the facility over time, without consideration of the suitability of the debt arrangements to its current and future needs.”

“Small business owners and their advisers should review existing debt finance arrangements on a regular basis to ensure that the debt facilities suit the life cycle of the business.”

“Whether you are experiencing the rapid growth after start-up, expanding, considering exporting or are a mature business, banks can help you with products and services which meet your needs,” he said.
 
Finally, a word of warning from the bankers and the accountants. There are some predatory lenders which offer to consolidate all your loans and eliminate company debt, but it can come at a very high cost and can even put your company’s future in jeopardy. If the deal seems too good to be true, then it probably is!

To read the fact sheet, please visit the following websites:
Australian Bankers’ Association: www.bankers.asn.au/refinancedebt 
ABA’s Smarter Banking for Small Business website: www.smallbusinessbanking.com.au/refinancedebt
CPA Australia: https://www.cpaaustralia.com.au

For further information:

ABA	CPA Australia
Heather Wellard, Public Relations Phone: 02 8298 0411 Mobile: 0409 830 439	Licardo Prince Communications Adviser Ph: 03 9606 9746 M: 0401 777 917