Can I refinance a private loan that has already defaulted?

Yes, but the options narrow and the costs increase. A loan in default typically attracts penalty interest from the existing lender, and a new lender will price the higher risk into their rate and LVR. The key requirement is adequate property security and a credible exit strategy. Acting before a formal default — ideally 6–8 weeks before maturity — gives you significantly more options and lower costs.

How long does a private refinance take?

For a straightforward refinance where the property type and borrower position are standard, expect 5–14 business days from application to settlement. If a new valuation is required, add 3–5 business days. Complex structures or properties in regional areas may take longer. Your broker should provide a realistic timeline at the outset.

Will refinancing hurt my credit score?

The refinance itself — taking a new loan to repay an existing one — doesn't negatively affect your credit score. However, if the existing loan has been reported as in default or arrears before the refinance settles, that history remains on your credit file. Refinancing before any default is recorded protects your credit position.

Is it better to extend with the same lender or refinance with a new one?

In most cases, extending with the existing lender is cheaper and faster. You avoid new establishment fees, legal costs, and valuation charges. However, if the existing lender has increased rates to penalty levels, imposed unreasonable conditions, or declined the extension, a new lender may offer better terms overall — even accounting for the refinance costs. Your broker can model both scenarios and advise which is more cost-effective.

Short-Term Business Refinance Loans: When and How to Refinance Private Debt

Oct 24, 2025
6 min read

Updated: May 4

In short: Most short-term private business loans in Australia - bridging facilities, second mortgages, caveat loans, fast commercial first mortgages - are designed to be refinanced. The two most common exits are refinance back to bank prime debt once trading or balance-sheet conditions normalise, and refinance to another private facility on better terms once the original urgency has passed. Timing the refinance well can save thousands of dollars in interest and protect a clean credit record.

What is a short-term business refinance?

A short-term business refinance is the replacement of an existing short-term private business loan with a different facility - usually either a bank prime facility or a more keenly priced private loan - before, at, or shortly after the original facility's maturity. The underlying business and security position do not necessarily change; what changes is the cost, term and structure of the debt.

Short-term private business loans are normally written with a clear exit in mind - private lenders price the facility for a defined window and expect the borrower to have a documented refinance pathway. The refinance itself is therefore the natural completion of the original transaction, not a sign of trouble.

When should you refinance a short-term private business loan?

1. When the trigger event has passed

Many short-term private loans are taken out to bridge a specific event - completion of a contract, sale of a property, settlement of an ATO debt, completion of a renovation. Once that event has passed and trading has normalised, bank prime refinance is usually available and the private facility should be retired.

2. When you have two clean BAS cycles behind you

Banks underwriting business loans typically want to see at least two consecutive BAS cycles reflecting the post-event trading position. Refinance windows often open at month six or month nine of a 12-month private facility - earlier than many borrowers expect.

3. When the current facility is approaching maturity

Start refinance conversations no later than 60-90 days before the current facility's maturity date. Bank credit decisions take six to ten weeks for a commercial deal of any complexity; leaving the refinance to the last month is the most common cause of an unwanted extension on the existing private loan.

4. When market conditions move in your favour

Falling rates, improved business performance, or a stronger property valuation can all open up refinance options that did not exist when the original facility was written. Reviewing the position annually - even on facilities that are not yet at maturity - is good practice.

5. When you can consolidate multiple facilities

If your debt stack has grown to include multiple short-term facilities, refinance into a single consolidated facility almost always reduces blended cost, simplifies reporting, and improves the next bank conversation.

How to refinance: the practical pathway

Confirm the existing facility's payout figure and discharge requirements. Request a current payout figure from the existing lender, including any early repayment fees, exit fees and accrued interest to the planned settlement date. Confirm the discharge process and any notice period.
Prepare a refinance information pack. A refinance pack typically includes: most recent two years of business financials, year-to-date management accounts, last four BAS, an aged debtor and creditor report, current asset and liability statement for the directors, and a short narrative explaining what the original private facility achieved and how the position has now normalised.
Engage a commercial broker (or two competing lenders). A commercial broker who works with both banks and specialist private lenders will quickly tell you whether you are now bankable, or whether a private-to-private refinance on better terms is the realistic next step.
Indicative terms and acceptance. Most lenders will issue indicative terms within five to ten business days of receiving a complete pack. Compare the all-in cost - including establishment fees, legals, valuation, and any cash-out - rather than the headline rate alone.
Valuation, credit decision and documents. Allow three to six weeks for a bank refinance from acceptance of indicative terms to settlement; one to two weeks for a private-to-private refinance.
Settlement and discharge. Settlement occurs on a date that aligns with the existing facility's payout requirements. The new lender pays out the existing lender directly, the existing security position is released, and the new security is registered.

Costs of refinancing: a realistic checklist

Discharge fee on the existing facility (varies by lender)
Solicitor or conveyancer costs for both the discharge and the new registration
Valuation fee on the security property (where required)
Establishment fee on the new facility (typically 0.25-2% depending on lender and product)
Mortgage registration fees (state-based)
Broker fee, where applicable

When the refinance is from a private facility back to bank prime, the interest savings over the new facility's term will almost always outweigh the one-off refinance costs - often within a single month.

When to extend rather than refinance

Sometimes the right answer is not to refinance immediately but to extend the existing private facility for a defined further period. Extension can make sense when:

The original exit is delayed by external factors but remains intact (sale on market, contract receivable due, BAS cycle pending)
The cost of arranging a new facility for a short remaining window outweighs the interest saving
Bank refinance is achievable but on a slightly longer timeline than the maturity allows

Most established private lenders, including Innovate Funding, will consider a commercial extension where the underlying exit remains sound. Engage with the lender early - extensions arranged with notice are typically simpler and better-priced than those negotiated under pressure at maturity.

Refinancing to bank prime: what to expect

A successful refinance from a short-term private facility back to bank prime debt typically delivers:

A materially lower interest rate (private facilities price for speed and risk; bank prime prices for term and balance sheet)
A longer term - often three to five years for a business facility, or up to 25-30 years for a residential refinance
Structured covenants and reporting (which are real obligations, but normal for bank lending)
A more rigorous, slower credit process - which is exactly why private bridging existed in the first place

Refinancing private-to-private: when does it make sense?

Not every business is ready for bank prime debt at the maturity of a short-term private facility. Where bank refinance is not yet available, a refinance from one private lender to another can still deliver significant value:

Lower rate on a longer-tenure private facility once the original urgency has passed
Higher LVR or extended term to ride out a longer-than-expected trading recovery
Consolidation of multiple short-term facilities into one
Restructure of repayment profile - capitalised interest, prepaid interest, or interest-only with bullet repayment

Regulatory note - commercial vs consumer credit

Most short-term business refinance loans in Australia are commercial facilities and are not regulated under the National Consumer Credit Protection Act, provided the loan is wholly or predominantly for business or investment purposes. The Australian Securities and Investments Commission (ASIC) regulates Australian credit licensees and has published consumer-focused guidance through MoneySmart. Always obtain independent legal and financial advice before signing loan documents.

FAQs - short-term business refinance loans

Will refinancing my private business loan hurt my credit score?

A refinance enquiry is recorded on a borrower's credit file. Where the refinance succeeds and the existing facility is paid out cleanly, the long-term credit impact is usually neutral to positive. Multiple rapid-fire enquiries to many lenders is more damaging than a single well-targeted refinance.

Can I refinance a second mortgage into a first mortgage?

Yes - particularly where the existing first mortgage is small and the borrower wants to consolidate the entire position into a single new first mortgage. This often improves pricing materially. Innovate Funding's first mortgage solutions regularly include this kind of consolidation refinance.

How long does a private-to-private refinance take?

Seven to fourteen business days is typical, depending on whether a new valuation is required and how clean the title and security position are.

What documentation do I need to refinance to a bank?

Typically: two years of business financials, year-to-date management accounts, last four BAS, current ATO portal showing no overdue debt, asset and liability statement, and current property valuation. The more complete the pack at submission, the faster the bank decision.

Can I refinance early without penalty?

Most reputable Australian private business loans allow early repayment without an additional penalty, although a minimum interest period (commonly three or six months) may apply. Always check the loan documents at the outset and factor any minimum interest period into the refinance timing.

Talk to a private lending specialist

If you have an existing short-term private business loan and are approaching the right window to refinance - or if you want a commercial second opinion on whether to extend or replace - contact the Innovate Funding team for a confidential discussion. We assess deals on the merits of the security and the exit strategy, not just servicing calculators.

Learn more about our private lending solutions or browse other case studies on the Innovate Funding blog.

Disclaimer: This case study is published for general information only. Loan terms, interest rates and outcomes vary and depend on the specifics of each transaction. Innovate Funding (Australian Credit Licence applicable to consumer credit; commercial transactions are unregulated) lends to commercial and investment borrowers across Australia. Always obtain independent legal and financial advice before entering a loan.