Yes, in most cases a business can consolidate multiple loans into a single facility, subject to affordability and the new provider's criteria. There is no legal limit on how many debts can be combined. The practical limits are whether the business can show it can afford one larger repayment, whether each existing lender will allow early settlement on acceptable terms, and whether the new provider is comfortable with how the borrowing was built up in the first place.
Which loans can and cannot be combined
Most unsecured business borrowing can be included in a consolidation. That covers term loans from banks and alternative lenders, business credit and charge cards, overdrafts that have become permanent, merchant cash advances, revenue-based finance and short-term or revolving facilities. Trade creditor balances can sometimes be settled from the new facility if the supplier agrees a figure.
Some debts are harder to include, or should not be included at all.
- Secured loans and commercial mortgages. They can be refinanced, but the security has to be released and re-taken, which adds legal cost and time. Well-priced secured debt is usually cheaper than any unsecured replacement.
- Hire purchase and asset finance. The asset belongs to the finance company until the final payment. Settling early is possible, but the pricing often makes it unattractive.
- HMRC arrears. A consolidation loan can be used to pay a tax bill, but HMRC's own Time to Pay arrangement is often the cheaper route. Our HMRC tax debt page explains how it works.
- Loans already in default or subject to enforcement. A new provider will rarely lend to clear a debt that is being chased. Free help from Business Debtline comes first in that situation.
- Personal borrowing used for the business. A director's personal loan or credit card is a personal debt. Some providers will not accept it as a business consolidation purpose, though a sole trader's position is different because the business and the person are the same legal entity.
How many loans is too many?
Providers do not usually set a number. What they set is a ceiling on affordability. A rough measure many use is how much of the business's monthly cash flow, after normal costs, would be taken up by the new repayment. If that proportion is comfortable, five loans can be consolidated as easily as two. If it is not, even two may be declined.
The number of loans does matter in a different way. Each facility has its own settlement figure, early repayment terms and notice period. Co-ordinating six redemptions on one day takes organisation, and if one lender is slow, the completion can stall while other settlement figures expire. Beyond four or five facilities, a staged approach, settling the most expensive first, may be more manageable.
The business debt consolidation service page sets out the full process and the costs involved. If you are unsure where to start, our help page on managing multiple business loans is written for exactly that position.
How providers view stacked loans
"Loan stacking" is the term lenders use when a business takes out several loans from different providers within a short period, often without each lender knowing about the others. Providers treat it as a warning sign, for two reasons. It suggests the business has been borrowing to cover shortfalls rather than to invest, and it means each lender's affordability assessment was made without the full picture.
That does not make consolidation impossible. In fact, a business that has stacked loans is often exactly the one that benefits most from replacing them with one properly assessed facility. But the new provider will want to understand how the stack was built. Expect to be asked:
- What each loan was for, and when it was taken out.
- Whether any lender was told about the others at the time.
- Whether every payment on every facility has been made on time.
- What has changed so that the business will not need to borrow again after consolidating.
A clear, honest account of how the position arose and a credible plan for what happens next carry more weight than any individual document.
Affordability, illustratively
Suppose a business has four facilities with monthly repayments of £900, £650, £1,100 and £450, a total of £3,100. Its average monthly surplus after operating costs is £3,600. The existing commitments take 86 per cent of that surplus, which most providers would consider stretched. Consolidating the same £58,000 balance over a longer term might reduce the monthly figure to around £1,700, or 47 per cent of surplus, which many would view as workable. The longer term means more interest is paid overall. These figures are illustrative only and not a quote.
Bounce Back Loans and Recovery Loans
Government-backed scheme loans can usually be included in a consolidation, but they deserve careful thought before they are. Two points stand out.
First, the interest rate on a Bounce Back Loan was fixed at a low level by the scheme, and many Recovery Loan Scheme facilities were priced competitively. A consolidation loan from the open market may well cost more. Including a cheap loan in a more expensive facility increases the cost of that portion of the debt.
Second, Bounce Back Loans were made without a personal guarantee. A replacement unsecured facility for a limited company will almost certainly require one, which means the director takes on a personal liability that did not exist before. Our page on personal guarantees explains what that involves.
Where a scheme loan is in arrears, some lenders offer repayment extensions or payment holidays under the original scheme terms. Those should be explored before new borrowing is considered.
When providers decline
Consolidation applications are most often declined for one of the following reasons.
- The combined repayment, even over a longer term, is not affordable from trading cash flow.
- Recent missed payments, County Court judgments or an unpaid HMRC liability.
- Trading history that is too short to assess, usually under a year.
- Declining turnover or losses in the latest accounts without a convincing explanation.
- Loans stacked within the last few months, with no clear purpose.
- No security or guarantor available where the provider requires one.
A decline from one provider is not a decline from all. Criteria differ, and some providers specialise in businesses with past difficulties, usually at a higher cost or against security. Think carefully before accepting an expensive offer simply because it was the only one available.
Alternatives if consolidation is not available
- Refinance one loan rather than all of them. Replacing the single most expensive facility can achieve much of the saving with a smaller application. See business loan refinancing.
- Negotiate with existing lenders. A longer term or a temporary reduced payment on an existing loan involves no new borrowing. This is restructuring, not consolidation.
- Fix the cash-flow timing instead. If the real problem is customers paying late, invoice finance may address it more directly than another loan.
- Overpay the dearest facility first. Where there is any surplus, directing it at the highest-cost debt reduces the total paid without any application at all.
- Take free advice. If the business cannot meet its commitments as they stand, Business Debtline and the guidance on GOV.UK are the right first steps, and a licensed insolvency practitioner may need to be consulted.
If you want to talk through whether your mix of loans is likely to be consolidated, and what the trade-offs might be, you can make an enquiry. We can explain the options that may be relevant and, at your request, may be able to introduce you to third-party finance providers. We do not lend ourselves.
Key takeaways
- Multiple business loans can usually be consolidated; affordability, not the number of loans, is the main limit.
- Unsecured loans, cards, overdrafts and merchant cash advances are commonly included. Secured debt, asset finance and HMRC arrears need separate thought.
- Stacked loans raise questions, so be ready to explain how the borrowing arose and why it will not recur.
- Scheme loans are often cheaper than any replacement and may carry no personal guarantee, so including them can cost more.
- If consolidation is declined, refinancing one loan, restructuring with existing lenders or free advice may be better than an expensive offer.