A business debt consolidation loan pays off several company debts and leaves you with one loan and one monthly repayment. It can lower what you pay each month, but a longer term often costs more in total. It suits limited companies that can afford the new repayments. If you're already behind, get free advice first.

In our illustrative example below, stretching £30,000 of debt from 18 to 36 months cuts the monthly repayment by £866 but adds £3,139 in interest.

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What is a business debt consolidation loan?

A business debt consolidation loan is new borrowing your company uses to pay off several existing debts in full. You're left with one lender, one interest rate and one monthly repayment.

It works in one of two ways:

• The new lender pays your existing lenders directly.
• The new lender pays the money to your company, and you settle each debt yourself.

Either way, the old agreements end and the new one starts. Your company now owes the new lender the full amount, plus interest, on new terms.

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Consolidating vs refinancing: what's the difference?

Consolidating combines several debts into one. Refinancing replaces one existing debt with a new one on different terms, usually to change the rate, the length or the shape of the repayments. Both mean taking on a new credit agreement.

Sometimes the reason to switch isn't the rate at all — it's understanding what you owe. Victoria Simpson, founder of VCare Group, on why invoice financing didn't work for her company: ‘I felt like we were playing with monopoly money. We were looking at two different percentages, and you only draw down part of it. I always found it hard to know where I actually stood.’

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Which business debts can you consolidate?

Most unsecured business borrowing can be consolidated: business credit cards, overdrafts, merchant cash advances and other business loans. Tax owed to HMRC is different - talk to HMRC about Time to Pay before you borrow to pay it.

What to watch for with each:

• Business credit cards. Card rates are often high and variable. Moving the balance into a loan with fixed repayments makes each month predictable — as long as you don't run the cards back up.
• Overdrafts. Clearing an overdraft with a term loan swaps a flexible limit for fixed repayments. Decide whether to keep the overdraft open for emergencies or close it.
• Merchant cash advances. A merchant cash advance takes a share of your card sales. Replacing it with a loan gives you a fixed monthly repayment instead. Ask the provider for its settlement figure first.
• Other business loans. Check each loan agreement for early repayment charges before you settle it.
• Hire purchase. The agreement is tied to the asset, so settling it early can change who owns what and when. Check the terms with the finance company.

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Will consolidating save your company money?

Consolidating can lower your monthly repayment, but it only saves money if the new rate and term cost less in total than keeping your existing debts. A longer term usually means more interest overall, even at a similar rate.

Here's an illustrative example. A limited company has three debts, each with 18 months left. They're a £15,000 term loan at 12%, £10,000 on a business credit card at 24% and a £5,000 overdraft at 20%. That's £30,000 in total. It compares keeping them with one consolidation loan at 15%.

Illustrative figures, calculated with standard loan repayments and no fees. They're not an iwoca quote.

What the example shows:

• Over the same 18 months, consolidating saves £612 in interest, because the expensive card debt now costs 15% instead of 24%.
• Over 36 months, the monthly repayment falls by £866, but the company pays £3,139 more in interest.
• The cheapest option in total isn't the one with the lowest monthly repayment.

A lower monthly repayment can still be the right choice if it keeps your cash flow steady. Just make that choice knowing the full cost. To try your own figures, use the business loan calculator.

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Check these costs before you switch

Early repayment charges on the old debts, fees on the new loan, any security and a personal guarantee can all change whether consolidating is worth it. Ask each lender for its settlement figure before you apply.

Before you sign, check:

• Exit fees. What each existing lender charges to settle early.
• New loan fees. Any arrangement or broker fee, added to the total cost.
• Security. Whether the new lender wants business assets or property as security.
• A personal guarantee. Many business lenders ask a director to guarantee the loan personally. If the company can't repay, the lender can ask the director to.

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What do business debt consolidation loans cost?

Rates depend on the lender, your company's credit profile, the amount, the term and whether the loan is secured. As a benchmark, the Bank of England's average rate on new bank loans to small and medium-sized businesses was 6.63% in August 2026. Unsecured lenders typically charge more.

That average covers bank lending, much of it secured. An unsecured business loan from an alternative lender usually costs more, because the lender takes more risk. Compare offers on the total amount you'll repay, not the headline rate.

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When consolidation isn't the answer

If your company can't afford its current repayments, is already missing payments or owes tax it can't pay, a new loan is unlikely to help and can deepen the problem. Get free, independent advice first - Business Debtline helps limited company directors.

Signs that consolidating probably won't help:

• You're using new credit to cover day-to-day costs.
• You've missed payments or received default notices.
• The new repayments only work if sales pick up.
• You owe HMRC and can't pay the bill in full.
• The debt comes from an ongoing cash flow problem that a new loan won't fix.

Other routes to consider:

Business Debtline's own guidance is clear: borrowing more is not usually a good option if you're already missing payments, and it can lead you further into debt. For tax, read how HMRC Time to Pay works and contact HMRC early. A CVA can only be set up through an insolvency practitioner, and it needs the support of creditors owed 75% of the debt (by value) among those who vote.

Directors have extra duties if the company may be insolvent. Once a company can't pay its debts, directors must put creditors' interests first. Directors aren't normally personally liable for company debts, but there are exceptions. These include wrongful trading and any personal guarantee you've signed. If you're unsure, speak to an insolvency practitioner or Business Debtline before taking on new borrowing.

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What lenders look at, including if your credit isn't perfect

You can sometimes get a consolidation loan with weaker credit, but expect fewer offers and higher rates. Lenders look at your company's and directors' credit history, your bank statements and how much of your income already goes on debt repayments.

What lenders usually check:

• Credit history. Your company's credit file and the directors' personal credit records.
• Bank statements. Money in, money out and the repayments you already make.
• Affordability. Whether your company can manage the new repayment alongside everything else.
• Arrears. Missed payments, defaults or tax arrears can count against an application.

At iwoca, we use bank statements to see the repayments your company already makes on other debts, and that feeds into what we think you can afford. Existing debt can reduce the amount we offer, or mean we can't lend.

What to have ready:

• A list of every debt, with balance, rate, monthly payment and settlement figure.
• Recent business bank statements.
• Your latest accounts and management figures.
• A simple cash flow forecast showing the new repayment.

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How to consolidate business debt in five steps

Start by listing every debt with its balance, rate, monthly payment and any exit fee, then check what your company can afford each month. Only then compare offers on total cost, not just the monthly figure.

1. List your debts. Write down each balance, rate, monthly repayment, end date and settlement figure.
2. Check affordability. Work out what your company can repay each month without squeezing payroll, suppliers or tax.
3. Compare offers on total cost. Ask banks, alternative lenders and brokers for quotes. Compare the total repaid, fees, security and any personal guarantee.
4. Settle the old debts. Make sure each one is paid off in full and closed, or decide on purpose which to keep open.
5. Fix the cause. Look at what built the debt up - late-paying customers, thin margins or seasonal dips - so it doesn't build up again.

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Where an iwoca Flexi-Loan fits

An iwoca Flexi-Loan lets UK limited companies borrow from £1,000 to £1m over up to 60 months, with a decision within 24 hours and no fee for repaying early. Every Flexi-Loan needs a personal guarantee from at least one director.

What a Flexi-Loan involves:

• Who can apply. UK limited companies.
• Amount and term. £1,000 to £1m, over up to 60 months.
• Repaying early. You can repay early with no fee, which helps if your cash flow improves.
• Personal guarantee. At least one director signs a personal guarantee. We don't take property as security when you take out the loan.
• Cost. Our business loan interest rates start at 1.5% per 30 days. Your rate depends on your company's circumstances.

A Flexi-Loan probably isn't the right fit if:

• Your company is already behind on repayments — speak to Business Debtline first.
• You owe HMRC — ask about Time to Pay rather than borrowing to pay arrears.
• A cheaper secured or bank loan is available to you and you're happy to wait for it.
• No director is comfortable giving a personal guarantee.

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Business debt consolidation FAQs

Can a limited company get a debt consolidation loan?

Yes. Banks, alternative lenders and brokers offer business loans that companies use to consolidate debt, subject to affordability and credit checks.

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Does consolidating affect my company's credit score?

Applying usually involves credit searches, and a new loan shows on your company's credit file. Clearing several balances and paying the new loan on time can help your score over time. Missed payments will hurt it. You can check your company's position with iwoca Credit Compass, a free business credit score.

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Can you refinance a debt consolidation loan?

Yes, if a lender will offer better terms and you've checked the early repayment terms on your current loan. The same test applies: compare the total cost, not only the monthly repayment.

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Can I consolidate HMRC debt with a loan?

Ask HMRC about Time to Pay before borrowing to pay tax you owe. HMRC can agree an affordable payment plan, and tax arrears can count against a loan application.