Consolidating business debt: one structure instead of five

How does an established business end up with five lenders?

Rarely by design. A bank overdraft and term loan form the core. A difficult quarter brings a short-term loan with daily repayments. A second follows to meet the first. Equipment is bought on separate contracts through different suppliers’ finance partners. Credit cards carry some supplier payments. An ATO payment arrangement absorbs a BAS that couldn’t be paid in full.

Each decision made sense in its moment. Together they produce a repayment profile that’s hard to see, harder to manage and expensive to carry — and a balance sheet that worries every lender who looks at it.

Start with the repayment map

Before choosing a structure, lay out every obligation by frequency as well as amount.

Facility (illustrative)	Balance	Repayment	Frequency	Annualised outflow
Short-term loan A	$180k	$1,450	Daily (business days)	About $363k
Short-term loan B	$95k	$2,100	Weekly	About $109k
Equipment contracts ×3	$210k	$6,800	Monthly	About $82k
Credit cards	$60k	Minimums +	Monthly	Varies
ATO arrangement	$140k	$11,500	Monthly	About $138k
Bank term loan	$600k	$9,200	Monthly	About $110k

Illustrative only; no real business. Daily and weekly debits often dominate. In this example, the two short-term loans alone account for more annual outflow than the rest combined, despite being a minority of the balance.

Which debts should be consolidated?

Priority: expensive, short-term, high-frequency debt. Daily and weekly repayment loans, merchant advances and card balances.

Priority: ATO debt. The ATO’s general interest charge compounds daily and, from 1 July 2025, is no longer tax deductible. Clearing it also removes the risk of the debt being reported to credit bureaus — the ATO can report business tax debts of at least $100,000 overdue by more than 90 days where the business isn’t engaging with it. See ATO debt for established businesses.

Case by case: equipment finance. Include contracts with high costs or long remaining terms; leave well-priced contracts close to maturity.

Often keep: well-priced bank debt. If the bank’s core facilities are reasonable and the bank is comfortable, a second-ranking facility or separate limit can clear the expensive debt without moving the core.

What does the new structure look like?

A good consolidation isn’t one giant loan. It’s the minimum number of facilities, each matched to its job:

• Term facility for the permanent layer: the consolidated short-term debt, ATO payout and any equipment contracts brought in. Often property-backed, from $20,000 to $5,000,000.
• Revolving limit for working capital swing, so the business doesn’t recreate the problem next winter. See working capital facilities.
• Bank transaction facilities retained where sensible.

Test the result with the debt service cover calculator: enter current annual repayments, then the proposed ones, and compare cover. If you’d like a specialist to model it, send us your repayment map — no credit check is involved.

Costs and mechanics to include

• Payout figures from each lender, including any early repayment fees
• Break costs on fixed-rate facilities
• Discharge and legal fees
• PPSR releases — equipment and short-term lenders commonly register security interests on the Personal Property Securities Register, and these must be released at settlement
• Establishment and valuation costs for the new facility

The true saving is the difference in total cost and repayment profile after all of these.

When consolidation isn’t the answer

• The business is loss-making with no credible turnaround. Consolidation buys time but doesn’t fix the underlying problem.
• Short-term debt is nearly repaid. It may cost more to exit than to let it run off.
• The consolidation would only extend terms without reducing cost or improving structure. Sometimes a targeted refinance of one facility is better. See refinancing business debt.

How do you sequence the payouts on settlement day?

Consolidation involves several lenders being paid at once, and the order matters. A well-run settlement looks like this:

1. Request payout figures from every lender being cleared, valid to the settlement date. Short-term lenders may quote daily; build in a day or two of buffer.
2. Confirm security releases. Each lender holding a mortgage, caveat or PPSR registration must provide a discharge or release at settlement. Chase these early — a missing release can hold up the whole transaction.
3. Stop direct debits. Cancel daily and weekly debit authorities so a payment doesn’t come out after the loan is cleared.
4. Pay the ATO last in the queue but on the same day. Obtain the exact balance from the ATO portal, pay it from settlement funds, and keep the receipt for the new lender.
5. Reconcile afterwards. Check every facility shows a nil balance and every registration has been removed. Search the PPSR a few weeks later to confirm.

A settlement statement listing every payout, fee and release is worth insisting on. It becomes the opening entry in the new debt schedule and is the evidence a future lender or buyer will ask to see.

The most common failure is a debt nobody listed. An equipment contract signed by a branch manager or a card facility attached to an old account can surface after settlement and undo the neat picture. Search your bank statements for every recurring debit before you finalise the schedule.

Ready to simplify the balance sheet?

If your repayments are coming out daily, weekly and monthly to more lenders than you’d like, a consolidation can give the business room to breathe. Bring your repayment map, recent trading and the security available.

We don’t run a credit check when you first enquire, and we don’t pass your details to a string of lenders; one specialist works the file. Please list every facility accurately on the form — missing a debt is the most common reason consolidations come up short. Start a consolidation enquiry.