Can I settle an existing balloon payment with new finance?
Quick answer: yes — but only sometimes and with conditions
Short answer: you can often settle an existing balloon payment using new finance, but approval depends on lender criteria, the asset, your business credit profile and the original finance contract terms.
New finance can take the form of refinance, asset finance rollover, a new lease, or a commercial loan that pays out the balloon balance to the existing lender.
Understanding balloon payments and why they matter
What is a balloon payment? It is a large final repayment due at the end of a hire purchase, lease purchase or some finance agreements that reduces monthly instalments earlier in the term.
Balloon structures are common in vehicle and equipment finance because they lower monthly costs while allowing the buyer options at the end of term.
At maturity you typically have options: pay the balloon, refinance it, return the asset (if contract allows), or buy it outright for a pre-agreed residual value.
When a balloon payment causes problems
Cashflow pressures, unexpected asset depreciation or a change in business circumstances can make the balloon hard to settle on maturity.
If you cannot pay the balloon you risk repossession, default charges, or damage to your credit profile depending on your lender’s terms.
Can new finance settle the balloon? Typical routes
Yes — lenders commonly offer refinance solutions that pay the existing lender and replace the balloon with a new facility that spreads the cost over time.
Key routes include refinance loans, asset refinance (remortgaging the asset), new hire purchase/lease agreements, and bridging loans intended to cover short-term gaps.
Common options explained
- Refinance loan: A term loan or overdraft that repays the balloon and replaces it with monthly repayments.
- Asset refinance: A new asset finance agreement that uses the equipment or vehicle as security and funds the balloon payment.
- Rollover lease/purchase: Some brokers arrange a continuation or replacement finance through the same or a different lender.
- Short-term bridging: A bridge may cover the balloon while you secure longer-term funding.
Which option suits you depends on the asset, remaining life, credit profile and lender appetite for that sector.
For equipment-specific cases, many businesses explore specialist equipment and asset finance products to spread the residual amount — see our equipment finance overview for more on that route.
https://bestbusinessloans.ai/loan/equipment-finance/
Practical steps to refinance a balloon payment in the UK
Step 1: Review your existing contract for early settlement clauses, break costs, and any penalties for refinancing.
Step 2: Gather financial documents lenders need — recent accounts, VAT returns, cashflow projections and asset details such as age, mileage and condition.
Step 3: Get multiple quotes and check eligibility
Use a broker or comparison service to see which lenders will consider refinancing a balloon on your asset and how their terms compare.
Step 4: Ask for a Decision in Principle or Quick Quote to understand affordability and likely rates before committing to a formal application.
Step 5: Complete due diligence and settle
If approved, the new lender will usually pay the existing lender directly and set up a new repayment schedule with you.
Make sure the settlement figure from the original lender is confirmed in writing and that any early settlement costs are explicit before signing.
Costs, eligibility and compliance you must consider
Refinancing a balloon payment may lower monthly outgoings, but it can increase total interest paid over time, add arrangement fees or trigger early settlement charges.
Common costs include exit fees, settlement administration fees, arrangement fees for the new facility, valuation fees and potential higher interest rates for longer terms.
Eligibility factors lenders review
- Your business age, turnover and profitability.
- Credit history and director guarantees or personal credit where applicable.
- Asset condition, residual value and marketability.
- Sector risk and lender appetite for that industry.
Compliance and advertising: Best Business Loans is an introducer and not a lender; we do not provide finance directly and we are not regulated by the FCA for lending activities.
We aim to provide clear, fair and non-misleading information and we encourage you to seek full terms from authorised lenders and get independent advice where needed.
When refinancing is not the best option and next steps
Refinancing is not always the right move — if the balloon is small relative to remaining term, if the asset value is heavily depressed, or if refinancing costs outweigh benefits, alternatives may be better.
Alternatives include negotiating a payment plan with your current lender, selling the asset, returning it (if contract allows), using a corporate credit facility or deferring investment until cashflow improves.
How Best Business Loans can help you decide
We do not lend but our AI-driven matching and network of lenders and brokers can show which providers are likely to refinance a balloon payment for your asset class and sector.
Submit a Quick Quote to receive a Decision in Principle or eligibility check — this helps you compare costs, likely rates and practical outcomes without committing you to a single lender.
Key takeaways
- You can often settle a balloon payment with new finance, but approval depends on lender criteria, asset condition and your business finances.
- Compare refinance loans, asset finance, rollovers and bridging options; always factor in total cost, not just monthly payments.
- Check your existing finance contract for break costs and confirm settlement figures in writing before proceeding.
- Best Business Loans introduces you to lenders and brokers who may be able to help; we do not provide loans directly and we always encourage reading full lender terms.
Ready to check your options?
If you want a quick, unbiased eligibility check and personalised matches to lenders or brokers who handle balloon refinances, start with our free Quick Quote.
It takes a couple of minutes and helps our AI match you to providers who actively work with your sector and asset type.
Contact and credibility
Best Business Loans helps UK businesses compare and connect with finance partners using AI and an experienced network of brokers and lenders.
We handle enquiries securely and do not lend or charge for initial matching services; always review lender terms and seek regulated advice where appropriate.
Author: Best Business Loans — Smart UK Business Finance, Powered by AI.
Updated: 29 October 2025. For guidance or support email hello@bestbusinessloans.ai or submit a Quick Quote now to start your eligibility check.