Behind on an existing equipment contract and wondering whether refinancing is even on the table. Short answer: it usually is. An arrears is not automatically a no — it changes the lender category, it changes the rate, and it changes what you need to do first. But "behind on a payment" and "finished" are two very different things, and plenty of operators write themselves off when there is still a clear path through.
This is the kind of file most brokers will not take on. Our desk does, regularly. Here is what credit teams will still look at, what it costs, and the order to do things in.
An arrears is a signal, not a verdict
When a credit team sees an arrears, they do not read "this person cannot pay". They read "something happened — what was it, is it over, and is the business still sound underneath it". The arrears is a signal that prompts questions, not a verdict that ends the conversation. The whole game is answering those questions before they are asked.
A one-off arrears from a single bad month — a late invoice from a head contractor, a tax bill that landed at the wrong time, a machine down for repairs — reads completely differently from a pattern of slipping further behind every month. The first is a cash-flow timing event the business has recovered from. The second is a trajectory problem. Credit teams can work with the first all day. The second needs a frank conversation about whether refinancing is the right move at all, or whether something more fundamental needs addressing.
What credit teams will still look at
Even with an arrears on the file, a credit team is weighing the same things they always weigh — they are just reading them with more care:
- The story behind the arrears. A clear, honest explanation of what happened and why it is behind you carries enormous weight. A timing event you have recovered from is a very different file from an unexplained slide.
- Whether the business is still trading soundly. Current turnover, recent bank conduct, and forward work all matter. A business with the arrears behind it and a full order book is a real proposition.
- The asset and its value. Equipment that holds its value gives the lender security to lean on. The stronger the asset relative to what is owed, the more room there is to refinance.
- How recent and how deep. An arrears from eight months ago that has been cleared reads far better than one that is live and growing. Recency and depth both move the file.
The four core numbers still drive the file even here — there is a full breakdown in the 4 numbers every lender asks. The arrears sits on top of them as the thing that has to be explained, not as a replacement for them.
The rate cost — be straight with yourself about it
Here is the honest part. Refinancing with an arrears almost always means a step down in lender category, and a step down in category means a step up in rate. A clean file might sit with a tier 1 bank or a sharp broker-market non-bank. A file with a live or recent arrears typically moves to the specialist non-bank or sub-prime specialist category — lenders set up to write conduct-affected files, who price for the added risk.
That rate step is real, and it can be significant. The question is not whether it costs more — it does — but whether the refinance solves a problem worth that cost. If refinancing clears the arrears, resets the repayment to something serviceable, and buys the business room to recover, the higher rate can be money well spent. If it just moves the same unserviceable repayment to a more expensive lender, it is a band-aid on a bigger wound. We will tell you straight which one you are looking at.
The aim, almost always, is to use the refinance as a step — get through the recovery on a specialist rate, then refinance again to a sharper category once the conduct is clean and the arrears is well behind you. A bad year does not have to be permanent on your file; what credit teams forgive and what they don't walks through exactly how that recovery reads over time.
What to do first
The order matters here more than almost anywhere. Before you approach anyone:
- Get the arrears figure exact. Know precisely how far behind you are and on what. Vague is fatal here — a credit team needs the real number.
- Write the story down. What happened, when, and what has changed. Honest and specific. This is the single most valuable thing you can bring.
- Check whether the existing lender will work with you. Sometimes the cleanest path is a hardship arrangement or a restructure with the lender you already have, not a refinance to a new one. It is worth knowing before you move.
- Understand the security position. The existing financier holds security over the asset. A refinance means paying them out and the new lender taking over that security — a coordinated payout, the same mechanism that runs through any payout-and-release deal.
And do not sit on it. An arrears that is addressed at month one is a far more workable file than the same arrears left to compound for six. The earlier the conversation, the more categories are still open to you. There is a clear view of the whole assessment path on the how it works page, and because a refinance like this always lands "subject to credit", it is worth understanding what that phrase actually means and how to tighten it.
When a refinance is the wrong move
Straight talk: refinancing is not always the answer. If the arrears is a symptom of a repayment the business genuinely cannot service, moving it to a higher-rate lender makes the monthly worse, not better. If the asset is worth less than what is owed, there may be nothing to refinance against. And if the business itself is the problem rather than a single event, finance is not the fix. Part of the job is telling you when refinancing helps and when it just delays a harder decision — that honesty is worth more than a quote that papers over the real issue. There is a related read on using a refinance to free up cash flow in truck refinance for cash flow, including when it works and when it does not.
The short version
An arrears changes the lender category and the rate, but it is rarely an automatic no. Credit teams look at the story behind it, whether the business is still sound, and how recent and deep it is. Get the exact figure, write the honest story, understand the security, and move early — these are exactly the files our desk is set up for. See the full hard deals approach for where this sits.
Behind on a contract and want to know what is still possible? Send the arrears figure, the asset detail and the honest story, and we'll start the file — and tell you straight whether a refinance helps or whether there is a better move.