What is business debt consolidation?
Consolidation replaces several debts with one. A new loan, usually secured on property for anything sizeable, pays out your existing creditors at settlement. From then on you deal with one lender, one repayment and one set of terms.
For a business under pressure, the main benefit isn’t just tidiness. It’s getting rid of the debts that are doing the most harm: IRD arrears that attract penalties and interest, short-term loans with heavy repayments, and supplier accounts where the creditor is threatening action.
Which debts are worth consolidating?
Not every debt belongs in a consolidation. A useful way to sort them:
| Debt | Consolidate? | Why |
|---|---|---|
| IRD arrears (GST, PAYE, income tax) | Usually yes | Penalties, interest and strong collection powers |
| Short-term or private loans with high repayments | Usually yes | Frees up weekly cash flow |
| Overdue supplier accounts | Often | Stops pressure and possible statutory demands |
| Business credit cards | Often | Expensive revolving debt |
| Asset finance on vehicles or equipment in good standing | Sometimes | May already be well priced; check break costs |
| Your main home loan | Rarely | Usually left alone with a second mortgage behind it |
How to tell if consolidation actually helps
Before consolidating, do the arithmetic. Write down every debt with its balance, repayment amount and frequency, then convert them all to a weekly figure. Compare that total with the proposed new repayment.
Then run a 13-week cash flow forecast with the new repayment in it. If the business can meet it, along with current GST, PAYE, wages and rent, consolidation is working. If it can’t, the loan might be the wrong size, the wrong term, or the wrong answer.
Two warning signs that consolidation may just move the problem:
- The cause hasn’t changed. If the business is still losing money each month, one loan will fill up the same way several did.
- Old credit gets re-used. Paying out cards and overdrafts only helps if they stay paid.
Why property security usually makes sense
For consolidations of any size, property-secured lending tends to offer more room and a longer runway than unsecured options. Our lending partners lend from $20,000 to $1m against New Zealand property, including homes, rental properties, commercial property and land, as a first or second mortgage. No financials are needed for the initial assessment, and bad credit or arrears are considered case by case. That’s useful when the debts you’re consolidating are the reason the bank said no.
If you don’t have property, an unsecured loan based on your turnover may consolidate a few smaller debts, provided the business has been trading for six months or more.
Consolidation or complete refinance?
They overlap. We use “consolidation” for rolling several of your debts into one, and “complete refinance” for the bigger version: clearing everything, often including an existing expensive mortgage, so the whole business starts again on one structure. The right choice depends on how much equity there is and how many problems need solving at once.
Example scenario
Example scenario — for illustration only. A Wellington café owner had IRD arrears of around $45,000, two short-term business loans with daily repayments, and a card balance used for equipment. The daily deductions were taking the till’s takings before rent could be paid. A second mortgage on the owner’s Lower Hutt home paid out all four debts. The weekly outgoing to lenders fell by more than half, which was the difference between trading on and closing.
Getting started
Make a list of what you owe, to whom and how often you pay. Then start an enquiry and a lending specialist will talk through whether consolidation makes sense.