Is now the time to refinance?

The Bank of England base rate is at a historic low of 0.1% making debt as cheap as it has ever been, so the time might be right to review existing debt facilities.

With lockdown restrictions continuing to ease, cash will be required to help get businesses back to pre-covid levels and therefore an opportunity to renegotiate existing debt onto better terms (lower interest rates and/or longer repayment basis) could help secure vital cash within the business to fund these needs.

Businesses that have a variety of debt facilities, both short term and long term should evaluate their requirements going forward and review the market to see if a better deal can be secured. Consolidating existing debt across multiple providers can prove beneficial as interest rates may be more attractive now than when the facility was first agreed. Repayment profiles can be extended to help reduce the annual cash cost in servicing the debt or possibly seeking an interest only period. These options may prove vital over the next few years whilst the sector recovers from effects of lockdown.

When thinking about refinancing the objectives of the exercise must be clear and communicated with the lender. These may include reducing monthly payments, creating a cash injection, to free up security or as part of a business restructure. You must also consider the relationship with your existing lenders and how these lenders, or potential new lenders, view your business due to increased risk and uncertainty. Before any refinancing is undertaken it is crucial to ensure all costs are identified including breakage fees for fixed rate borrowing or any new arrangement fees.

Our dedicated EQ Food & Drink team have a vast amount of experience in assisting clients refinance debt with the aid of up to date management information and projections which highlight the positive impact it will have on the business. We would be happy to discuss your options with you to ensure your business flourishes. Please get in touch by calling one of our offices or emailing leisure@eqaccountants.co.uk.