Drawing on Sam’s experience assessing and structuring funding for New Zealand businesses.
But businesses change. Sales move. Costs change. Debt gets paid down. New opportunities come up. You might invest in equipment, take on another loan, win a major customer or simply find yourself running a very different business from the one you were running a year or two ago.
So it can make sense to revisit your lending too.
Not because changing it is always the right answer, but because it’s worth knowing whether the structure you have still works for the business you have today.
Look beyond the rate
Interest rate matters, but it’s only one part of what your lending costs – and how it affects your business.
Loan term, repayment amount and frequency, fees and other debts all play a part. Just as importantly, the timing of repayments needs to sit alongside everything else coming in and going out of the business, including customer payments, payroll, suppliers, tax and day-to-day operating costs.
Sam Coleman, Managing Director at Line Capital, describes this as thinking about cashflow health – making sure there’s enough in the bank to meet your debt repayments, as well as all the other commitments in the business.
That distinction matters because the lowest repayment, the lowest rate and the lowest overall borrowing cost are not necessarily the same thing.
For example, extending the term of a loan may reduce the amount you need to repay each week or month, helping ease immediate cashflow pressure. But spreading repayments over longer can also mean paying more interest over the life of the loan.
As Sam puts it:
“What’s more important to you? Is it the cost thing or is it the cashflow pressure? And often it’s the case it’s the cashflow that they want to solve for rather than the cost.”
That’s why a useful lending review needs to start with what the business is actually trying to achieve.
What has changed since you borrowed?
If it has been a while since you put your lending in place, there are a few useful questions to ask. Have you paid down a meaningful part of the debt? Has your revenue or profitability changed? Are you now carrying several loans with different repayment schedules? Has an opportunity come up that will require more capital? Or is the business under more cashflow pressure than it was when the loan was originally structured?
Sometimes the lending itself hasn’t become a problem. The circumstances around it have simply changed. Having several loans can make this particularly important. Looking at each repayment separately doesn’t always tell you what the combined debt is doing to the business.
A review can look at the total position – outstanding balances, repayments, terms, fees and any costs involved in changing or repaying existing lending – before deciding whether doing anything differently would genuinely improve the position.
Your loan term doesn’t necessarily have to stay the same
One of the practical points Sam sees in working with businesses is that borrowers can be more proactive about managing their lending than they sometimes realise.
“We get people moving their loan terms all the time.”
That can happen in different ways. A business might make a lump-sum payment and keep its existing repayment amount, allowing the loan to be paid off sooner. In another situation, it might make a lump-sum payment and then look at restructuring the remaining balance. Or a business experiencing a change in cashflow may want to explore whether a different term or repayment structure makes more sense.
The important point is that none of those options is automatically better.
Reducing your term can lower the time you remain in debt but increase regular repayments. Extending it may reduce repayment pressure while increasing total interest paid. Refinancing can change the overall structure, but there may also be fees or early-repayment costs to take into account.
The numbers need to be looked at together.
Sometimes the best answer is to change nothing
Reviewing your lending doesn’t mean you need to refinance it.
If the current structure still suits the business, the repayments work comfortably with cashflow and changing it would add unnecessary cost, leaving it alone may be the best outcome.
That’s part of the value of doing the exercise.
The question isn’t “What new loan can I get?”
It’s “Does the lending I have still make sense for my business?” And the answer should take into account both where your business is today and what you’re trying to do next.
It might be worth another look
If your business has changed since you last arranged funding, your lending is one of the things worth reviewing alongside it.
Look at the balance that remains, the repayments you’re making, the total cost, other debt in the business and what those commitments are doing to your cashflow.
Then you can make an informed call on whether the current structure is still doing its job – or whether there’s something worth changing.
If it’s been a while since you reviewed your business lending, talk to the Line Capital team. We can look at where things sit today and talk through whether there are any options worth considering.
This information is general in nature and does not take into account the specific circumstances of your business. Any lending, refinance or change to existing lending is subject to assessment, approval and applicable terms and conditions. Changing a loan term or refinancing debt can affect repayments and the total cost of borrowing. Consider the applicable interest rate, fees, early-repayment costs, security requirements and loan terms before making a decision.
Have a business funding opportunity that needs a closer look?
Talk to Line Capital about the business, the numbers and what sits behind them.
