Refinancing a business in debt

A business or company in financial difficulty can provide itself with the necessary financial breathing space by refinancing its debt. Optimizing the current financing structure makes it possible to reduce existing interest charges and repayment obligations. This is often achieved by taking out a new loan or with borrowed capital, for example, from an investor or a bank. Refinancing existing loans and debts helps to strengthen the flexibility and financial security of a company.

Impact of refinancing

Refinancing is replacing, for example, a current loan with a new loan on better terms. Companies often decide to refinance or transfer a loan because the current market situation is more favourable compared to when the loan was taken out. A takeover by a new owner with new capital can also be a reason for this. In other situations, refinancing can pave the way for a restart. Refinancing debt balances the corporate finances and provides scope for healthy growth and the realization of business ambitions.

When is refinancing worthwhile?

Refinancing the corporate finances is worthwhile in various situations. Companies with many different creditors can raise new funds through refinancing and thus pay off existing debts in one go. Refinancing is also worthwhile for companies that run into difficulties due to the strict conditions attached to current (financial) obligations. Examples include short-term, high-interest loans. One condition is that the terms of any new financing, such as the interest rate and instalments are more favourable and that they improve a company’s financial position.

Refinancing of debt

Refinancing of debt can be achieved in almost any situation. For example, an investor can take over the debt of a company and cover the amount on new, more attractive loan terms. Refinancing offers several advantages. For example, the term of loans can be extended or shortened but above all, it is possible to choose the loan offering the most favourable conditions for the company. Note: a lender can impose a penalty if a credit agreement is redeemed early through refinancing.

Company in financial difficulty: preventing bankruptcy

In general, companies opt for refinancing because they are forced to reduce their financial burden to, for example, prevent bankruptcy. It can also be worthwhile for healthy companies to critically review their overheads. Refinancing debt may offer immediate benefits through attractive interest rates, raising new working capital and improving oversight. This certainly applies to companies with many different creditors. Would you like to receive more information about refinancing existing loans, investing in your company or about restructuring or reorganizing your business? Our specialists in bankruptcy law and financing law will be happy to advise you about the possibilities in your situation. Feel free to contact us and discover how our approach makes a difference. You are not committed to anything.