Business Loan Refinance in Denmark
Business Loan Refinance Denmark
Free, 100% digital Business loan refinance comparison
Save money with lower interest rates
Instant answers from up to 21 Danish lenders
Business loan refinance in Denmark involves replacing an existing commercial debt obligation with a new loan that offers more favorable terms. Companies often pursue this strategy to lower monthly payments, reduce interest rates, or modify the repayment schedule to better suit current cash flow. The Danish financial market offers various avenues for refinancing, ranging from traditional banking institutions to modern online lenders and crowdlending platforms.
Refinancing is a strategic financial tool used by sole proprietorships (enkeltmandsvirksomheder), limited liability companies (ApS), and public limited companies (A/S). The process requires a thorough assessment of the company’s financial health, creditworthiness, and the current economic environment. Lenders in Denmark utilize centralized databases and digital verification systems to process these applications efficiently.
Rates and Fees
The cost of refinancing business debt varies significantly based on the lender type, the company’s financial history, and the security provided. The following table outlines typical ranges for interest rates and associated fees in the Danish market.
| Component | Typical Range / Detail |
|---|---|
| Interest Rate (Variable) | 4.5% – 15% per annum |
| Establishment Fee | 1% – 3% of loan amount (Min. 2,000 DKK) |
| Repayment Term | 1 – 10 years |
| Registration Fee (Tinglysning) | 1,850 DKK + 1.5% of principal (if secured) |
| Approval Time | 2 – 5 business days (Online), 2 – 4 weeks (Bank) |
| Collateral Requirements | Personal guarantee, company charge, or unsecured |
Interest rates for business refinancing are generally risk-based. Established companies with strong annual reports will secure rates at the lower end of the spectrum, often close to interbank rates plus a margin. Startups or companies with fluctuating revenue may face higher rates to offset the lender’s risk. It is important to note that establishment fees are often deducted from the loan proceeds before payout.
When refinancing involves secured debt, such as a loan backed by company assets or real estate, government registration fees apply. The Danish state charges a fixed fee plus a percentage of the secured amount for registering the pledge in the Land Register (Tinglysning). These costs must be calculated into the total benefit of refinancing to ensure the move is financially sound.
Understanding Business Loan Refinance in Denmark
Refinancing is the act of paying off an existing loan with proceeds from a new loan. In the context of business loan refinance in Denmark, this is often done to improve liquidity or reduce the total cost of borrowing. The new loan typically comes from a different lender, although renegotiating with a current bank is also a form of refinancing.
The primary motivation is often interest rate reduction. If a business took out a loan when market rates were high or when the company had a poor credit profile, the interest costs might be burdensome. If the company’s credit score has improved, or if market rates have dropped, refinancing can lock in lower costs.
Another common reason is to alter the loan term. Extending the repayment period reduces monthly installments, freeing up cash for daily operations or investment. Conversely, shortening the term increases monthly payments but reduces the total interest paid over the life of the loan.
Overview of Danish Banking for Businesses
Denmark has a highly digitized and transparent banking sector. Businesses seeking to refinance have three main categories of lenders to consider: traditional banks, online lenders, and crowdlending platforms.
Traditional Banks
Major Danish banks like Danske Bank, Nordea, Jyske Bank, and Sydbank dominate the market. They offer the lowest interest rates but have the strictest requirements. They typically require detailed business plans, multiple years of annual reports, and a solid relationship with the bank advisor. The process can be slow, often taking weeks to finalize.
Online Lenders
Fintech companies and specialized online business lenders have gained significant market share. They utilize automated algorithms to assess creditworthiness. These lenders focus on speed and accessibility. A business can often receive a decision within 24 hours. Rates are generally higher than traditional banks, but the criteria are more flexible.
Crowdlending
Crowdlending platforms connect businesses directly with private and institutional investors. This is an alternative for companies that may not fit the rigid boxes of traditional banks but have a compelling business case. Interest rates are determined by an auction process or a risk assessment performed by the platform.
Eligibility Requirements for Refinancing
To qualify for refinancing in Denmark, a business must meet specific criteria. These requirements ensure the company is a legitimate legal entity and has the capacity to repay the new debt.
CVR Number and Registration
Every business in Denmark must have a CVR number (Central Business Register number). Lenders require the company to be registered and active. Most lenders prefer companies that have been operating for at least 6 to 12 months. Newly registered companies may find it difficult to refinance debt immediately.
Financial Documentation
Lenders will request the latest annual report (Årsrapport). For smaller companies or sole proprietorships, they may request the latest tax assessment notice (Årsopgørelse) from Skattestyrelsen. This verifies the income and tax status of the business and its owners.
Bank Statements
Recent bank statements are required to analyze cash flow. Lenders look for consistent revenue streams and responsible management of existing overdrafts or expenses. They check for returned payments or signs of financial distress.
Credit Assessment and RKI
Creditworthiness is the cornerstone of any refinancing application. Danish lenders rely heavily on credit databases to assess risk.
RKI and Debitor Registret
RKI (Ribers Kredit Information) and Debitor Registret are the two main default registers in Denmark. If a business or its owners are listed in these registers for unpaid debts, obtaining refinancing is extremely difficult. Most mainstream banks and online lenders automatically reject applicants listed in RKI.
Credit Scoring Models
Lenders use internal scoring models. These models analyze the company’s equity ratio, profit margins, and liquidity. For business loans in Denmark, the lender will also assess the industry risk. Sectors with high bankruptcy rates may face stricter terms.
The Role of MitID and Digital Verification
The application process for refinancing is almost entirely digital in Denmark. MitID is the national digital ID system used for secure login and digital signatures.
Business owners use their MitID to sign loan applications and loan agreements. This provides legally binding digital signatures. It also allows lenders to pull data directly from public registers, streamlining the verification process.
Lenders may also use “eSkat” solutions. This allows the applicant to grant the lender temporary access to their tax data at Skattestyrelsen. This automated retrieval of tax returns and pay slips reduces paperwork and speeds up approval times.
Types of Debt Suitable for Refinancing
Businesses accumulate various types of debt. Not all debt is equally suitable for refinancing, but consolidation is a common strategy.
Term Loans
Standard bank loans with fixed monthly installments are the most common targets for refinancing. If a business has multiple small term loans, merging them into one larger loan can simplify administration and potentially lower fees.
Overdraft Facilities (Kassekredit)
An overdraft is a flexible credit line attached to a business bank account. While convenient, overdrafts often carry high variable interest rates. Refinancing a permanently used overdraft into a term loan can structure the debt and reduce interest costs.
Merchant Cash Advances
Some businesses use short-term financing based on future credit card sales. These advances often have very high effective interest rates. Refinancing these into a standard business loan can significantly reduce the cost of capital.
Collateral and Security in Danish Business Loans
Refinancing terms depend heavily on whether the loan is secured or unsecured. Security reduces the lender’s risk, leading to lower interest rates.
Company Charge (Virksomhedspant)
A company charge is a floating charge over the company’s assets. This includes inventory, receivables, equipment, and intellectual property. It does not include real estate. By registering a virksomhedspant, the lender secures a priority claim on these assets in case of bankruptcy.
Personal Guarantees (Kaution)
For small and medium-sized enterprises (SMEs), lenders almost always require a personal guarantee from the owners. This is known as “selvskyldnerkaution.” It means the owner is personally liable for the debt if the company defaults. This bypasses the limited liability protection of an ApS or A/S structure regarding that specific loan.
Unsecured Refinancing
Unsecured loans do not require specific asset pledges, though personal guarantees are still common. These loans are faster to process because they avoid the valuation and registration of assets. However, they carry higher interest rates to compensate for the increased risk.
Costs Associated with Refinancing
While the goal is to save money, the act of refinancing incurs costs. These must be weighed against the potential savings.
Early Repayment Fees
Some fixed-rate business loans have early repayment penalties. This is to compensate the bank for the loss of expected interest income. Variable-rate loans in Denmark can usually be repaid at par (course 100) without penalty, but it is essential to check the specific loan agreement.
Establishment Fees
The new lender will charge a fee to set up the loan. This is typically a percentage of the loan amount. For large business loans, this fee can be negotiated.
Registration Fees (Tinglysningsafgift)
If the refinancing involves moving security (like a mortgage or company charge) from one lender to another, registration fees apply. The Danish state charges a fixed fee (currently 1,850 DKK for most documents) plus a percentage tax. When refinancing, it is sometimes possible to transfer the existing stamp duty to the new loan to avoid paying the full percentage again.
Fixed vs. Variable Interest Rates
Businesses must choose between fixed and variable rates when refinancing.
Variable Rates
Variable rates follow market benchmarks, such as CIBOR (Copenhagen Interbank Offered Rate). They are generally lower than fixed rates initially. However, if market rates rise, the monthly payment increases. This introduces uncertainty into the business’s cash flow planning.
Fixed Rates
Fixed rates remain constant for a set period, often 3 to 5 years. This provides budget certainty. The trade-off is a higher initial rate. Fixed-rate loans may also be more expensive to exit early due to breakage costs.
Refinancing for Debt Consolidation
Many businesses accumulate debt from various sources over time. A company might have a car loan, an equipment lease, and an overdraft. Managing multiple creditors is administratively burdensome.
Refinancing to consolidate debt in Denmark involves taking one large loan to pay off all smaller debts. The result is a single monthly payment and a single creditor. This often improves cash flow management. It also provides a clearer overview of the company’s total liabilities.
The Impact of Company Structure
The legal structure of the business affects the refinancing process.
Sole Proprietorship (Enkeltmandsvirksomhed)
In a sole proprietorship, the business and the owner are the same legal entity. Business debts are personal debts. Refinancing assessments will look heavily at the owner’s personal economy. The Danish Consumer Credit Act may offer more protection here compared to corporate loans.
Limited Liability Companies (ApS and A/S)
For ApS and A/S companies, the business is a separate legal entity. The credit assessment focuses on the company’s accounts. However, as mentioned, lenders frequently require personal guarantees from the owners, bridging the gap between corporate and personal liability.
Using a Loan Calculator
Before applying, businesses should calculate the potential savings. A loan calculator allows business owners to input the loan amount, interest rate, and term. By comparing the total cost of the new loan against the remaining cost of existing debts, the financial benefit becomes clear.
Calculators should account for the establishment fees and any exit fees from the old loans. A lower interest rate does not always equal savings if the upfront costs are too high.
Documentation Checklist for Refinancing
Preparation is key to a successful application. Lenders expect a comprehensive data pack.
- Identification: Valid passport or driver’s license and MitID.
- Company Details: CVR number and articles of association.
- Financials: Last 1-2 years of annual reports.
- Interim Accounts: Current year-to-date balance sheet and income statement.
- Bank Statements: Last 3-6 months of main business account activity.
- Debt Overview: Statements showing current balances of loans to be refinanced.
- Budgets: Operating budget and liquidity budget for the coming year.
- Tax Account: Printout from Skattekontoen showing no overdue tax or VAT.
Why Applications Get Rejected
Understanding common rejection reasons helps in preparing a better application.
Negative Equity
If a company has accumulated losses and has negative equity (liabilities exceed assets), lenders view it as high risk. Refinancing is difficult without injecting new capital or providing substantial outside collateral.
Unstable Cash Flow
Lenders look for the ability to service debt. Large fluctuations in revenue or periods of negative cash flow are red flags. A solid explanation or a seasonal business model must be clearly documented.
Tax Arrears
Outstanding debt to the Danish government (Skattestyrelsen) for VAT (moms) or payroll tax (A-skat) is a major warning sign. Most lenders will not refinance commercial debt if the company has unpaid public debts.
The Refinancing Process: Step-by-Step
The journey from decision to payout involves several distinct stages.
1. Analysis of Current Debt
The business owner reviews all current loan agreements. Key data points are the current interest rate, remaining term, monthly cost, and early repayment terms. This establishes the baseline.
2. Market Comparison
The borrower researches the market. This involves checking rates from the current bank and comparing them with offers from other banks and online lenders. Online comparison tools can provide a broad overview of loans in Denmark available for businesses.
3. Application Submission
The application is submitted, usually via the lender’s website using MitID. The required documentation is uploaded.
4. Credit Assessment
The lender reviews the application. They check RKI, analyze the annual reports, and assess the collateral. They may call the business owner to discuss the business plan.
5. Offer and Negotiation
If approved, the lender issues a loan offer. This document details the interest rate, APR (ÅOP), fees, and terms. Business owners should read this carefully. Rates and fees are often negotiable, especially for strong applicants.
6. Signing and Payout
Once the offer is accepted, the loan agreement is signed digitally with MitID. If security needs to be registered (Tinglysning), this process is initiated. Once registration is complete, the funds are released. The new lender may pay off the old debts directly to ensure the refinancing purpose is met.
Refinancing Equipment and Leasing
Refinancing is not limited to cash loans. Businesses can also refinance equipment. This is often done through “Sale and Lease Back.” The company sells its owned machinery or vehicles to a leasing company and leases them back. This releases capital tied up in assets, improving liquidity.
Alternatively, existing leasing contracts can sometimes be refinanced to lower monthly payments, though this depends heavily on the asset’s depreciation and current value.
Strategic Considerations for Growth
Refinancing is often associated with distress, but it is equally a tool for growth. By lowering debt service costs, a company increases its free cash flow. This capital can be reinvested in marketing, new hires, or inventory.
Furthermore, loan refinancing Denmark can be used to clear up a messy balance sheet before seeking equity investment. Investors prefer companies with structured, manageable debt profiles over those with high-interest, fragmented liabilities.
Legal Protections and Regulations
The Danish financial market is strictly regulated. The Danish Financial Supervisory Authority (Finanstilsynet) oversees banks and lending companies.
Transparency Rules
Lenders are required to provide clear information about the cost of borrowing. While the strict APR (ÅOP) disclosure rules of the Consumer Credit Act primarily protect individuals, principles of transparency also apply to business lending. Contracts must clearly state the interest rate, calculation method, and all fees.
Data Protection (GDPR)
Financial data is sensitive. Danish lenders must comply with GDPR regulations regarding the storage and processing of personal and business data. Information gathered during the application process cannot be shared without consent.
Alternatives to Refinancing
If refinancing is not possible due to credit issues or lack of collateral, businesses have other options.
Negotiation with Current Lenders
Before seeking a new lender, speak to the current one. Banks often prefer to restructure a loan (granting an interest-only period or extending the term) rather than forcing a default.
Equity Injection
Bringing in new capital from owners or investors can reduce the need for debt. This improves the equity ratio, which may make the company eligible for refinancing in the future.
Factoring
Instead of a loan, businesses can sell their invoices to a factoring company. This provides immediate cash flow based on sales already made. It is a different mechanism than refinancing debt, but it solves similar liquidity problems.
Final Checklist Before Signing
Before committing to a new refinancing agreement, verify the following:
- Is the new interest rate significantly lower?
- Are the establishment fees lower than the interest savings?
- Is the new monthly payment manageable within the current cash flow?
- Does the new loan require more collateral than the old one?
- Is the lender reputable and regulated by the Danish FSA?
Refinancing business loans in Denmark requires careful calculation. When done correctly, it strengthens the company’s financial foundation and supports long-term stability.
FAQ
Frequently Asked Questions
It is replacing an existing business loan with a new facility to lower interest costs, reduce monthly payments, change term, or consolidate several debts into one.
Typical options are traditional banks, online business lenders/fintechs, and crowdlending platforms. Banks tend to be cheaper but slower and stricter.
They assess CVR status, financial statements (årsrapport/interim accounts), bank statements, cash flow stability, equity ratio, tax/VAT arrears, and credit registers such as RKI and Debitor Registret.
Often yes. Common security is virksomhedspant and/or a personal guarantee (selvskyldnerkaution). Unsecured refinancing exists but usually costs more.
