A business overdraft you’ve been dipping into for months. A merchant cash advance that made sense at the time. An equipment lease and a business credit card you put stock purchases on last year. Four different lenders, four different repayment schedules, four different interest rates. You’re keeping up, but half your week feels like it’s spent managing debt instead of managing your business.

A debt consolidation loan lets you combine multiple business debts into one. You take out a new loan large enough to cover everything you owe, use it to pay off your existing lenders, and repay the new loan with a single monthly payment at a single interest rate. The total debt stays the same, but instead of four or five payments going to different lenders each month, there’s one.

For business owners, that simplicity matters more than it sounds. Cash flow is easier to forecast when there’s one fixed payment leaving the account on the same date every month. If the new loan comes with a lower rate than the average across your existing debts, you’ll reduce your monthly outgoings too, freeing up cash you can put back into the business.

But consolidation isn’t always the right move. A longer loan term can mean paying more interest overall, even at a lower rate. And if any of your existing agreements carry early repayment charges, the cost of exiting them can eat into the savings. It comes down to the numbers.

What is a business debt consolidation loan?

A debt consolidation loan is a loan you use to pay off multiple existing business debts. Instead of owing money to several different lenders, you owe it to one. You make one repayment each month, at one interest rate, over a fixed term.

It doesn’t reduce the amount you owe. If your business had £40,000 of debt before, you still have £40,000 of debt after. What changes is the structure around it. You go from four lenders to one, from several payment dates scattered across the month to a single one, and depending on the rate you’re offered, you could end up paying less interest over the life of the loan.

The easiest way to see how this plays out is with an example.

Debt	Balance	APR	Monthly payment
Business overdraft	£8,000	15.9%	£280
Merchant cash advance	£12,000	29.9%	£520
Finance lease	£14,000	9.5%	£340
Business credit card	£6,000	23.9%	£180
Total	£40,000		£1,320

That’s four different payments leaving your business account at four different times during the month, each at a different rate. The merchant cash advance alone is costing you nearly 30% interest.

After consolidation:

You take out a debt consolidation loan for £40,000 at 8.9% APR over four years. Your single monthly repayment is £993. You’re paying £327 less each month, you’ve cut your highest interest rate from 29.9% to 8.9%, and you have one payment to track instead of four.

Over the full term, you’d pay around £7,690 in interest on the consolidation loan. Kept separately, the combined interest across those four facilities, particularly the merchant cash advance and the credit card, would total closer to £15,000. That’s a saving of roughly £7,500, before accounting for the time reclaimed from managing multiple lenders.

That’s the scenario where consolidation clearly works in your favour. But the numbers don’t always line up this neatly. A lot depends on the rate you’re offered, the term you choose, and whether any of your existing agreements carry early exit fees.

How does business debt consolidation work, step by step?

The process is simple, but there are a few things worth doing before you rush into an application.

1. Work out exactly what your business owes

Go through every active borrowing agreement. Overdrafts, business loans, credit cards, merchant cash advances, asset finance – anything with a balance. Write down the outstanding amount, interest rate, and monthly repayment for each one. If you’re not sure what’s still live, check your business credit report through Experian.

• Tip: Be thorough. It sounds obvious, but business owners frequently miss a facility they opened years ago and barely use. One overlooked debt can change the maths entirely.

2. Check for early exit charges

Some business finance agreements charge a penalty if you settle early. This is most common with fixed-term loans, equipment leases, and merchant cash advances. The latter often calculate exit costs as a percentage of the remaining factor amount rather than a flat fee, which can be substantial. Check the terms on each agreement and factor those costs into your decision before you assume consolidation saves money.

3. Compare what you’re paying now with what a consolidation loan would cost

Add up your current monthly repayments and the total interest you’d pay across all your debts if you kept them as they are. Then model what a consolidation loan would cost over the same period. The monthly figure might look appealing, but a five-year loan on £40,000 at 11% costs considerably more in total than a three-year loan at 9.5%.

• Rule of thumb: If you can’t get a consolidation rate at least 3-5 percentage points below your average blended rate across existing debts, the maths rarely favours consolidation unless admin simplicity is the primary goal.

4. Shop around and check your eligibility

Some lenders offer a soft credit check that lets you see whether you’d be approved – and at roughly what rate – without affecting your credit score. Business lending options are considerably more varied than personal loans, and rates can differ significantly between lenders for the same application. Speaking to a broker who can search across multiple lenders at once usually surfaces better terms than going direct.

5. Apply for the loan

Once you’ve found a deal that works, submit a full application. The lender will run a hard credit check at this stage, and for larger amounts they’ll usually want to see business accounts and bank statements. If approved, funds are typically in your account within a few days.

6. Pay off your existing debts

This is the step business owners sometimes skip, and it’s the most important one. Use the loan to clear every debt you planned to consolidate. Close revolving credit facilities you no longer need. Don’t leave a balance sitting on an old business credit card.

7. Set up your new repayment

Arrange a direct debit so you never miss a payment. From here, you have one monthly amount going to one lender, and a clear date when your business will be debt-free.

When debt consolidation is a good idea (and when it isn’t)

Debt consolidation works well in some situations and makes things worse in others. Before you apply, it helps to be honest about which one your business is in.

Signs consolidation could work for you

• You’re juggling repayments across multiple lenders and losing track. If you’ve missed a payment not because the business can’t afford it but because you didn’t realise it was due, consolidation solves that problem immediately.
• You can get a lower interest rate than what you’re currently paying. If you’re paying 25% on a merchant cash advance and you can consolidate at 9%, the savings are obvious. Just make sure you compare the total cost over the full term, not just the monthly figure.
• You want to free up monthly cash flow. If your combined repayments are squeezing the business each month, consolidation at a lower rate or over a longer term can create breathing room. A longer term usually means more interest overall.
• You’ve got HMRC debt as well as commercial borrowing. Some lenders will settle HMRC liabilities directly as part of a consolidation loan, which can be simpler than arranging a separate Time to Pay. Check with your lender or broker whether this is an option before you apply

Signs it might not be the right move

• You’d be stretching the repayment term significantly. A lower monthly payment sounds appealing, but spreading £40,000 over seven years instead of three could mean paying far more in total interest. The monthly relief isn’t worth it if the long-term cost doubles.
• Your existing debts carry heavy early exit fees. Some business loans, equipment leases, and merchant cash advances charge a penalty for settling early. If those fees add up to several thousand pounds, they can wipe out any savings the new loan would give you.
• Your business is already struggling to meet its obligations. A consolidation loan rearranges your debt but doesn’t reduce it. If revenue doesn’t comfortably cover your outgoings, free advice from Business Debtline or an insolvency practitioner is a better starting point than more borrowing.
• You’re considering securing the loan against property but aren’t confident the business can sustain the repayments. A secured loan puts that asset at risk. If there’s any doubt about keeping up payments over the full term, an unsecured option or a different approach altogether is safer.

Business debt consolidation vs other options

A consolidation loan isn’t the only way to get your business debt under control. Depending on how much you owe, what type of borrowing it is, and your business’s financial position, one of these alternatives might be a better fit.

Option	How it works	Typical cost	Risk level	Best suited for
Asset refinancing	Release cash tied up in equipment, vehicles, or machinery your business already owns, and use it to pay down other debts.	Interest rates vary by asset type and condition. Typically lower than unsecured borrowing.	Medium. The asset is used as security. If you default, the lender can repossess it.	Businesses that own high-value assets outright and want to consolidate debt without taking on unsecured borrowing at higher rates.
Invoice finance	Borrow against unpaid invoices to free up cash flow, then use that cash to reduce or clear other debts.	Fees typically include a service charge (1% to 3% of turnover) plus a discount charge on funds drawn.	Low to medium. Your invoices are the security, not your property or equipment.	Businesses with strong receivables but cash flow pressure from slow-paying customers alongside existing debt.
Refinancing existing loans	Replace one or more existing business loans with a new one on better terms. The original loans are settled and you repay the new one instead.	Depends on the rate you’re offered. Arrangement fees of 1% to 3% are common.	Low to medium. You’re swapping like for like, but early exit fees on existing loans can add up.	Businesses with improved credit or trading history who can now access better rates than when they first borrowed.
Company voluntary arrangement (CVA)	A formal, legally binding agreement to repay a portion of your business debt over three to five years. The rest is written off.	Fees are built into the arrangement. You’ll typically repay a percentage of what you owe.	High. It’s recorded publicly, can affect supplier relationships, and comes with strict conditions on spending and borrowing.	Businesses with debts they can’t realistically repay in full who want to avoid liquidation.

If your business has strong assets or a healthy invoice book, refinancing or invoice finance can free up cash to clear expensive borrowing without taking on a new consolidated loan at all. These options work best when the problem is cash flow timing rather than total debt level.

If you can get a consolidation loan at a rate lower than what you’re currently paying across your existing debts and you’re comfortable with the repayment term, that’s usually the most straightforward path. One payment, a fixed end date, and a clear picture of what the business owes.

A CVA is a last resort. It keeps the business trading, but the consequences are serious and long-lasting. It’s not something to enter into without advice from an insolvency practitioner.

January’s always a strange month when you run a business. There’s new year energy, but there’s also everything you carried over from the last one. Maybe you’re coming off a strong December. Maybe you’re just glad it’s over. Either way, you’re probably starting to think about what’s ahead and how to make the most of it.

That’s what this guide is for. We’ve put together the things we think are worth knowing heading into 2026: what’s changing, what to watch out for, and what you can do now to set yourself up for a better year.

We talk to UK business owners every day about their funding, their cash flow, their plans. The conversations we have in January tend to shape how the rest of the year goes. So this is what we’d say if you were sat across the table from us.

Where things stand heading into 2026

Confidence among UK business owners is cautious. Only around one in five say they feel properly optimistic about the year ahead. That doesn’t mean everyone’s struggling, but it does mean most people are being careful.

Cash flow is still the thing that trips businesses up. 70% of small businesses experienced late payments in the first quarter of 2025. If you’ve ever had £20,000 sitting in unpaid invoices while you’re trying to cover payroll, you know how that feels.

Employment costs have gone up, and the numbers add up fast. Employer National Insurance is now 15%, up from 13.8%, and the threshold has dropped from £9,100 to £5,000 per employee. 

In real terms, if you’ve got ten people on your payroll, that’s roughly an extra £10,000 to £15,000 a year. The National Living Wage has increased too. For a business with a few full-time staff on minimum wage, that’s another few thousand on top.

On the other side, businesses that are investing say they’re seeing stronger customer demand. There’s money moving, and there are opportunities out there for those in a position to go after them.

This isn’t here to scare you. It’s here so you can plan properly. If you can see the pressure points early, you’ll handle 2026 better.

The year ahead: what’s changing?

Two big regulatory shifts are landing in 2026. If you employ people or earn over £50,000 from self-employment or property, at least one of these will affect you.

Employment law: the Employment Rights Act 2025

The Employment Rights Act became law in December 2025, and the changes are rolling out through 2026 and 2027. There’s a lot in it, but here’s what matters most for small and medium-sized businesses.

• From April 2026, statutory sick pay kicks in from day one of employment, with no minimum earnings threshold. Paternity and parental leave also become day-one rights. That means new hires are entitled to these from the moment they start, not after a qualifying period.

• From October 2026, “fire and rehire” becomes automatically unfair dismissal, unless your business is in genuine financial distress. Tribunal claim time limits extend from three to six months, giving employees longer to bring claims. And you’ll need to formally tell workers they have the right to join a trade union.

• From January 2027, the qualifying period for unfair dismissal drops from two years to six months. That’s a big one. It means employees can bring unfair dismissal claims much earlier, so your processes around probation, performance management, and documentation need to be solid from the start.

If you don’t have an HR person, now is the time to get your contracts and policies reviewed. ACAS has published guidance, and most HR consultants are offering reviews ahead of the changes. It’s worth the investment before April.

Making Tax Digital for Income Tax

If your combined income from self-employment and property is over £50,000, Making Tax Digital for Income Tax applies from April 2026. The threshold drops to £30,000 in April 2027, and £20,000 in April 2028.

In practice, this means two things. First, you’ll need to keep your records digitally using HMRC-compatible software. Second, instead of one annual Self Assessment, you’ll submit quarterly updates throughout the year, with a final declaration at the end.

If you’re already using something like Xero, QuickBooks, or FreeAgent, you’re mostly there. If you’re still working from spreadsheets or shoeboxes of receipts, you’ll need to make the switch before April.

The quarterly reporting sounds like more work, but it can help. You’ll have a clearer view of where you stand throughout the year, and fewer surprises when the tax bill lands.

Don’t leave this until March. Give yourself time to get comfortable with the new rhythm.

Cash flow: the thing that matters most

If you’re starting the year feeling cautiously optimistic but quietly anxious about your bank balance, that’s pretty normal.

Most businesses don’t fail because there’s no work or because they’re bad at what they do. They fail because cash doesn’t arrive when bills do. Wages need paying, VAT is due, suppliers want their money, rent comes out regardless. None of them care that you’ve got a big month coming up.

The goal for this year isn’t to predict exactly what’s going to happen. It’s to see the gaps early enough that you can actually do something about them.

The 13-week forecast

This is one of the most useful things you can do, and it doesn’t need to be complicated. A spreadsheet is fine. The point is to spot the tight weeks early, while you’ve still got options.

If you’ve got fifteen minutes today, we’d recommend setting one up. Here’s how we suggest doing it:

• List the money you’re confident is coming in: invoices raised, work signed off, recurring revenue
• List the non-negotiables going out: wages, rent, VAT, loan repayments, key suppliers
• Put them into the weeks they’ll land, not just “sometime this month” but the actual week

What you’ll end up with is a simple picture of where the pinch points are. Maybe you’ve got a payment due in week three but the invoice that covers it won’t land until week six. That’s a gap. 

It doesn’t mean you’re in trouble, but it does mean you need to plan for it. You could chase the payment earlier, split a supplier cost, hold off on something non-essential, or line up short-term funding while you’ve still got time.

Once it’s set up, keep it updated. It’s ten minutes a week, and it stops cash flow catching you out.

Getting paid

Late payment is one of those things that drains businesses slowly. It’s not always deliberate on the customer’s end, but it’s still expensive on yours.

The businesses that manage it well aren’t necessarily chasing harder. They’ve got a system that makes getting paid feel normal rather than awkward.

We’d suggest starting with the basics. Invoice as soon as the work is done, not at the end of the month. Confirm payment terms upfront, even with customers you’ve worked with for years. Use software that sends reminders automatically so it’s the system doing the nudging, not you. And follow up before an invoice is overdue, not after. A quick message checking everything is lined up for Friday is much easier than chasing something that’s three weeks late.

If your customers are reliable but just slow, you don’t have to sit and wait. Invoice finance lets you release cash from invoices that are sitting there unpaid, so you’re not funding someone else’s payment terms. It’s not right for every business, but if your cash flow problem is really a timing problem, it’s worth knowing about.

Building a buffer

Three months of fixed costs in reserve is a good target. If that feels a long way off right now, aim for one month first. Even that changes things.

We always recommend treating it like a bill. Set up a standing order into a separate account, keep it small and consistent, and don’t touch it unless something genuinely goes wrong.

A buffer means one late payer doesn’t turn into a panic, and you’re not leaning on expensive credit.

Do you need funding this year?

This is worth thinking about properly, because the answer isn’t always obvious.

Some businesses know they need funding. There’s a clear opportunity, a piece of equipment to buy, a contract that needs upfront investment, a gap to bridge. The numbers work, and funding is the tool that gets it done.

Others aren’t so sure. Cash is tight but you’re managing. There’s growth on the table but borrowing feels like a risk. Or maybe you’ve never taken on business finance before and the whole thing feels unfamiliar.

Both are valid places to be. We speak to people across that whole range.

When funding works

Funding works when it helps you do something that pays for itself. A vehicle that lets you take on more work. Stock that lets you fulfil a bigger order. Working capital that means you stop turning things down because you can’t cover the upfront costs.

It doesn’t work when you’re borrowing to cover up a deeper problem. If the business isn’t generating enough margin, adding a monthly repayment won’t fix that. It’ll make things harder.

If you’re not sure which situation you’re in, start with your numbers. What’s coming in, what’s going out, what’s the gap, and what would change if you had funding in place? 

If you can’t answer those questions clearly, that’s the first thing to work on. The 13-week forecast we mentioned earlier is a good place to start.

Choosing the right type

There’s no single “best” option. It depends on what you’re trying to do.

If you’re buying something specific like a vehicle or a piece of machinery, asset finance or hire purchase will usually be cheaper than an unsecured loan. The asset acts as security, which brings the cost down, and the repayment matches something that’s actually generating value for the business.

If your problem is timing rather than revenue, invoice finance lets you unlock cash that’s already owed to you instead of waiting 60 or 90 days for it to land.

If you need working capital for something that doesn’t fit neatly into either of those, an unsecured loan gives you a lump sum to use however you need.

We’re happy to talk you through what might work for your situation. It’s a ten-minute conversation that could save you a lot of time.

Setting yourself up well

If you think you might need funding at some point this year, the groundwork starts now.

Keep your management accounts up to date. Know your cash position. If you’ve got existing credit, stay on top of repayments. Lenders want to see that you understand your business and can handle the commitment.

The businesses that get the best rates and the quickest decisions are usually the ones that turn up with their numbers in order. It’s the difference between a quick decision and a drawn-out one.

Quick wins for Q1

January’s a good time to do the boring jobs that stop the year turning into a scramble. None of these require a full business overhaul, but each one gives you more control over cash, deadlines, and decisions.

1) Build a 13-week cash flow forecast

Time: About an hour to set up, then ten minutes a week to keep it current.

We’d recommend keeping this simple. All you’re trying to do is see where the tight weeks are before they arrive.

Start with this:

• Open a spreadsheet and label the next 13 weeks across the top
• Put in your fixed outgoings first: wages, rent, VAT, finance payments, key suppliers, anything that’s leaving your account no matter what
• Add money coming in, but only what you can reasonably expect, and put it in the week it usually lands, not the week it’s due
• Mark anything uncertain as uncertain, so you don’t accidentally plan around it

Once it’s in place, you’re looking for the weeks that go tight, then fixing them early.

Done when:

• You can point to the tight weeks in the next quarter and say what you’ll do about each one
• You’ve got a set day each week to update it, and you’ve kept it simple enough that you’ll actually do it

2) Tighten up your payment process

Time: About 45 minutes to tighten things up, then a small weekly routine.

This is usually the fastest way to pull cash forward, and it works best when it’s consistent and boring.

Start with this:

• Pick one rule for invoicing (on completion or at clear milestones) and stick to it for every job
• Check your payment terms on quotes and invoices, make sure they’re written clearly, and stop quietly extending them
• Turn on automated reminders so it’s the system doing the nudging, not you
• Set a simple follow-up point before the due date: a short message that assumes payment is scheduled and asks if they need anything to clear it

Done when:

• Invoices go out the same day the work is done or the milestone is hit
• Reminders go out automatically without you thinking about it
• You’ve got a weekly list of what needs a human follow-up, and it’s short

3) Check your Making Tax Digital position

Time: 30 minutes with your accountant, then a couple of hours to get set up properly.

If you’re in scope from April, leaving this until late Q1 usually creates stress for no reason.

Start with this:

• Ask your accountant to confirm whether you’re in scope and what income counts toward the threshold
• Choose compatible software and set it up properly once, including your categories, bank feeds, and how you’ll store receipts and invoices
• Decide who does what and when, so it doesn’t become an ad hoc job that nobody owns

Done when:

• Software is set up and you’ve run a short test period so you know the routine works
• You know exactly what you need to record week to week, and it fits into your normal admin

4) Review employment costs and contracts

Time: 60 to 90 minutes for an internal check, then specialist help if you need it.

If you employ people, it’s worth getting your basics straight early in the year. Policy changes and cost increases tend to land at the same time, and it’s easier to deal with them when you’re not also firefighting something else.

Start with this:

• Pull your contracts, policies, and onboarding docs into one folder and check they match how you actually operate
• Look at your wage bill for the year ahead and include the obvious pressures: statutory wage changes, sickness cover, any planned hires
• If anything looks unclear, book a short review with an HR consultant or employment solicitor and ask them to focus on practical gaps, not theory

Done when:

• You know your likely people costs for the next quarter and you’ve planned for them
• Your contracts and policies are current and you’re not relying on informal arrangements

5) Look at your existing finance

Time: 45 minutes to gather the info, then an hour to review it properly.

This is often where you can reduce monthly pressure without changing anything else about the business.

Start with this:

• List every facility and repayment: loans, leases, asset finance, merchant advances, overdraft, credit cards. Note the balance, term, rate, and monthly cost for each
• Check whether repayments land at the worst point in your month and whether the timing could be improved
• If you’ve got anything expensive or messy, take a view on whether it’s worth restructuring, refinancing, or replacing with something cleaner

Done when:

• You know exactly what your monthly finance outgoings are and what dates they hit
• You’ve identified the one facility that causes the most pressure and you’ve got a plan to improve it

Where to start

If you’re not sure which of these to tackle first: if payroll week is stressful, start with the 13-week forecast. If you’re always waiting on invoices, start with the payment process. If neither of those feel urgent, start with the existing finance review. It’s usually the easiest win.

We’ve put together a one-page checklist if you want something to print or keep open. Download it here.

We’re here if you need us

If anything in this guide has sparked a question, or you’re looking at the year ahead and want to talk something through, we’d love to hear from you.

We’re a small team with offices in Manchester and London. We spend most of our time helping UK business owners figure out their funding options. We’ll be honest with you about what’s out there and help you work out the right next step.

You can email us at hello@greenwoodcapital.co.uk or call us on 020 3340 9700. Or if it’s easier, contact us with a time that works for you and one of us will give you a ring.

Wishing you a strong 2026.

James, Jack, and the Greenwood Capital team