Refinancing existing debt vs Additional facility
Refinancing replaces an existing facility with a new one, often to secure better terms or release equity. Taking an additional facility leaves the existing arrangement untouched and adds new borrowing alongside it, usually against different or additional security.
| Criterion | Refinancing existing debt | Additional facility |
|---|---|---|
| Effect on existing debt | Replaced entirely by the new facility | Remains in place, unaffected |
| Security implications | Existing charges released and replaced | New charges added, existing ones stay as they are |
| Typical trigger | Better rate available, term ending, or equity release needed | Additional funding need without disturbing current terms |
| Complexity | Requires settling and closing the old facility | Simpler, existing facility untouched |
| Cost considerations | May involve early repayment charges on the old facility | No impact on existing facility's terms or charges |
| Overall debt level | Can stay similar, or increase if extra funds are drawn | Increases, since it sits on top of existing debt |
Refinancing makes sense when the existing facility no longer suits the business, whether because a better rate is now available, the term is coming to an end, or the business wants to release equity built up in an asset. It effectively resets the arrangement, and any early repayment charges on the old facility need to be weighed against the benefit of the new terms.
If the existing facility is on good terms and simply needs topping up, or the new need relates to a different asset or purpose entirely, adding a facility alongside the existing one avoids disturbing arrangements that are already working well. This is often quicker and cheaper than unwinding and replacing an existing facility unnecessarily.
The comparison should always include any early repayment or exit charges on the existing facility, the arrangement fees on the new one, and the interest rate difference over the likely remaining life of the debt. In many cases, particularly where an existing facility is only part way through its term, an additional facility alongside it turns out to be the cheaper and simpler route.
Refinance where the existing facility's terms, rate or structure no longer suit the business; add a new facility alongside it where the current arrangement is working well and only a top up is needed.
Not always, but many facilities include one, particularly if you are within a fixed rate period, so it is worth checking the original terms before deciding to refinance.
It is possible but usually requires the existing lender's consent or a carve out for the new lender's security, so this needs checking early in the process.
It depends on the cost of unwinding the existing facility versus the benefit gained, so it is worth comparing against simply adding a smaller, separate facility instead.
Not sure which route fits? Describe the requirement once and we will structure it and approach the providers whose criteria match. No upfront fees — charges are due only once funding is in place.
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