Loans

The first rule of debt is that provided that you are a good risk you can almost certainly get your rate reduced, and on most corporate debt this can produce instant savings of thousands of pounds a year. If any of the following strike a chord, then you may well have the scope to reduce payments, either by moving the debt or pressuring your bank into being more realistic as to what level of interest is truly fair for a good reliable client such as yourself.

Permanent Overdraft

This is de facto long term debt and should be costed as such. Consider converting to a mortgage.

Unsecured Lending

Is it really unsecured? What would happen if you defaulted? Are personal or corporate assets actually at risk? If so then why pay the higher rate of interest.

Personal Guarantees

If you have given them then your own assets are at risk, and your interest rate should be accordingly low.

Loans Secured on Commercial Property or Other Assets

This is fine unless there should be a problem, when your house could be on the line. If this is the case then you may be paying over the odds for the borrowings.

Any debts whose charging and interest rate structure was set up when the firm was going through a difficult period, but where that company is now much stronger, should now be treated, and charged, as a lower risk.

Changing Debt Structures

The treatment of any particular company will vary according to the nature of the company and its debt structure. That said in most private firms a serious assessment often shows that the owners house is on the line, even if this is not explicitly the case. There is often therefore much to be gained by recognising this reality and converting highly charged debt into a domestic mortgage. This allows you to benefit from the excellent rates and deals available.

Where this route is not viable, but the company does own commercial property then significant savings can still be made where there is highly charged debt (e.g. overdrafts) that may be converted to commercial mortgages. Simply suggesting to your bank that you might move your account can often produce savings of 2%. Converting overdrafts to mortgages can be cost effective at surprisingly low levels, and for larger cases the savings can be very significant indeed. In extreme cases several percentage points may be shaved off the overall interest rate.

This information is designed for information only and advice relating to any of these areas should be sought.

The Financial Services Authority does not regulate loans