Why do established SMEs end up with messy debt?
Few owners set out to run six different facilities. It happens gradually. An equipment loan here, a short-term loan to cover a tight month, a credit card for supplier payments, a GST instalment arrangement that never quite got finished. Each decision made sense at the time. Together they create problems:
- Repayments land on different days, often weekly or daily, which strains cash flow.
- Short-dated debt keeps rolling, so the business is always refinancing something.
- The most expensive debts get paid last, because they are the ones with the least pressure.
- IRD arrears grow with penalties and interest while the business pays other creditors first.
The pressure on SMEs has been real. Companies Office data reported by NewsWire in September 2026 showed 1,916 company liquidations in the first eight months of 2026, the highest for that period since 2010, with Inland Revenue bringing the majority of winding-up applications. Refinancing early, while the business is still trading well, keeps options open.
What can be refinanced?
A consolidation facility can typically pay out:
- short-term business loans and merchant cash advances
- business credit cards and supplier accounts that have gone onto payment plans
- equipment and vehicle finance where the payout makes sense
- IRD debt, including GST, PAYE and income tax arrears
- private loans from shareholders or family that need to be repaid
Secured or unsecured refinance?
Property-secured refinance is the most common route for larger consolidations. It can sit as a first or second mortgage over a home, rental, commercial property or land, even when that property already has a mortgage. No financials or tax returns are needed for the initial assessment, which matters when the latest accounts are behind. In some cases funding is possible within 24 hours of approval.
Unsecured refinance can suit smaller consolidations where the business has been trading for six months or more and bank statements show enough turnover to support the new repayment.
How do you judge whether a refinance is worth it?
Compare the old and new positions honestly. A simple table helps:
| Question | Existing debts | Proposed facility |
|---|---|---|
| Total monthly outgoings | Add every repayment | Single repayment |
| Payment frequency | Daily, weekly, monthly mix | One schedule |
| Exit costs | Break fees, payout figures | Establishment costs |
| Time until fully repaid | Each debt’s remaining term | Short to medium term |
| Security given | Existing charges and guarantees | New security |
Our guide on when to refinance business debt walks through each line. Every loan we arrange is priced on the business’s individual situation, and our job is to find the sharpest option available for it.
What about the IRD balance?
If Inland Revenue arrears are part of the picture, address them first. Penalties and use-of-money interest continue to accrue on overdue tax, and IRD has been active in pursuing older debts. Our guide on options for SMEs behind with IRD compares an instalment arrangement with paying the debt out through a loan.
Example scenario
Example scenario, generic and for illustration only. A Wellington building services company has a daily-repayment short-term loan, two equipment finance contracts and a PAYE arrears balance. The owners refinance all four into one property-secured facility over a rental they own. The daily deductions stop, IRD is cleared, and the business has one repayment to plan around.
Questions SME owners ask
Can IRD debt be included in a refinance?
Yes. IRD debt can be refinanced or paid out with a property-secured loan. Clearing it stops further penalties building and can take the pressure off before Inland Revenue escalates collection.
Will consolidating always reduce my repayments?
Not always. Consolidation usually makes repayments simpler and more predictable, and often lower per month because the balance is spread differently. Whether it reduces total cost depends on the debts being replaced and the new facility's pricing, which is set on your circumstances.
I have a default on my credit file. Can I still refinance?
Bad credit, defaults and arrears are considered case by case for property-secured loans. A default from a difficult period that has since been resolved is often less important than the current position of the business and the security available.
Are there costs to exiting my existing loans early?
Some lenders charge break fees or early repayment costs. Ask each existing lender for a payout figure before deciding, so you can compare the full picture.