Business Debt Consolidation Loans

Compare your loan options for debt consolidation here with Savvy and manage your business’ debts more comfortably.

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, updated on July 26th, 2023       

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What are business consolidation loans and how do they work?

Business consolidation loans are a type of business finance deal designed to help consolidate business debt into a single loan. This is achieved by the business in question, which is currently repaying a loan and/or other external debts, applying for a loan amount sufficient to cover all outstanding debts and pay them off immediately. This may be a loan to cover a tax debt or any other outstanding expense. After this is done, the loan is repaid over a set period in instalments (typically weekly) with interest until it’s fully repaid.

This finance type is favoured by many businesses as a means of more comfortably managing their outstanding liabilities, particularly if they’re high-interest debts such as credit card loan consolidation, and saving money in the process. For instance, it’s much simpler to keep on top of a single $100,000 business loan compared to a $70,000 business loan, a $20,000 equipment finance deal and two $5,000 credit card debts.

As mentioned, transferring high-interest debts under a lower-interest loan can help you save hundreds, if not more, over the life of your loan. To demonstrate this, take the following example:

Chloe is deciding whether to take out a business consolidation loan to cover her debts. She currently has the following to be paid:

  • $70,000 business loan over five years at 6% p.a. ($1,353 per month)
  • $20,000 equipment loan over five years at 5% p.a. ($378 per month)
  • $5,000 credit card debt at 18% p.a. (paying $120 per month)
  • $5,000 credit card debt at 22% p.a. (paying $140 per month)

By choosing to consolidate all of her business debt into a single $100,000 loan at 6% p.a., Chloe can save more than $3,500 overall and condense four different payments into one, reducing her monthly outlay by almost $80 in the process.

Which types of finance can I use to consolidate debt?

There’s a range of different finance types which can be employed to help you consolidate your business’ debts. It’s important to be across these types before committing to one offer over the others.

Unsecured business loans

Perhaps the simplest way of consolidating debt, unsecured business finance enables you to borrow up to $500,000 without worrying about affixing any collateral to your loan. Because of this, you can borrow to cover any business expense, which can include outstanding and mounting debts. However, it’s important to note that not all lenders will enable you to consolidate all types of debts in your business loan, with credit card loan consolidation sometimes excluded. Check with your lender to see whether you can have your loan approved to have your debts covered.

Secured business loans

A secured business loan may hold the key for your business when it comes to accessing the funds needed to consolidate your debts. These loans require the attachment of an asset, such as equity in a residential or commercial property or business equipment, as collateral for the loan, meaning the amount you can borrow will be directly tied to the value of the asset. You’ll be able to access greater amounts with this type of loan as a result and because they’re considered safer, you may have more luck bringing your debts under the one umbrella if they’re steeper.

Business line of credit

A different type of business finance, an unsecured or secured line of credit enables you to be approved up to a pre-determined amount and withdraw funds up to that limit whenever you wish. This can make it simpler for you to cover multiple expenses from the outset and easily use your credit line to pay for any others which may pop up in the future. This flexibility makes them popular with businesses who would rather draw funds when they need them, rather than receive a lump sum and repay it immediately.

Business overdraft facility

A business overdraft is similar in principle to a line of credit, except it’s attached to your business bank account. As such, you can use this in the same way as you would a line of credit. However, the main advantage of overdrafts is that they don’t come with any fixed minimum repayments, meaning you can contribute the amount you want whenever you need to. These can also stay open for use as long as they remain viable, so you can come back and draw more funds on demand.

Types of business loan

Why compare business loans through Savvy?

The pros and cons of debt consolidation business loans


Save money

By taking out a loan with a different lender, you can secure a lower interest rate and fees than you’re currently paying on your business loan.

More manageable repayments

Instead of having several different debts to be paid on different timescales, you’ll only need to worry about a single payment each week or so.

Tax-deductible interest

The other key benefit business loans bring is the ability to claim interest as a tax deduction, which could potentially save you hundreds, if not more, overall.


Longer repayment periods

The fact that you end up extending smaller debts over a longer term to ensure they’re manageable may mean you end up paying more for that portion.

Potential fees for refinancing

If your loan comes with early exit fees, you may be required to pay a significant sum to end your current loan early and take up a new one.

Not all debt accepted

As mentioned previously, your lender may not allow you to consolidate your specific debt, so your options might be more limited in this space.

Frequently asked business consolidation loan questions

When should I look to consolidate my business’ debts?

There are several situations you should look for before diving into your business loan debt consolidation. Firstly, you should ensure you find a great loan deal to allow you to do so, which you can find by comparing the best debt consolidation loans with Savvy right here. Additionally, where possible, you should look to take advantage of an improved financial position and credit score, which may entitle you to greater benefits on your business loan.

How quickly can my consolidation loan be approved?

Business loans can be approved, processed and funded as soon as the same day you apply, sometimes within hours. This is the case for unsecured finance, so you may find this isn’t the case if you’re pursuing a secured business loan.

How long can I take to repay my loan?

Unsecured small business loans are available for terms as short as three months up to a maximum of five years in some cases, while secured loans can be approved for terms up to as many as ten years in total. However, the loan term you’re approved for will depend on your profile as a borrower and the amount you’re wanting to borrow (you won’t be approved for a $5,000 loan over five years, for instance).

Should I use a balance transfer business card instead?

A balance transfer credit card enables you to transfer outstanding debts onto a card to take advantage of low rate offers, sometimes as low as 0%. In doing so, you can pay off your debt quickly without having to pay as much (or any) interest overall. However, it’s important to note that these offers are introductory and may only last for a few months, so they’re not suitable if you’re unable to turn your debt around in that time.

Can I make extra repayments on my business consolidation loan?

In most cases, yes – many of our lending partners offer loans without any penalty for paying them out early, which allows you to make additional repayments towards your loan debt and save money overall. You should prioritise this flexibility on any business finance deal, as you should allow your business the opportunity to pay down loans sooner should you generate more revenue than expected.

Will my interest rate be fixed or variable?

In most cases, business loans come with fixed interest rates. This allows for more accurate budgeting around monthly instalments and provides more certainty as to your financial commitment into the future. Fixed rate terms also protect you from rising interest rates across your loan term. However, you may prefer variable rates, as they enable you to take advantage of interest decreases and more commonly come without repayment restrictions.

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