Bakery Group Refinances $1.9M of Term Debt and Cuts Its Annual Interest by a Third

Our client runs a bakery group: two corporate stores and seven franchise locations across four provinces. The business performed. The borrowing had simply grown the way most borrowing grows, one deal at a time.

Three term facilities totalling about $1,871,000 sat with a legacy lender: a $500,000 term loan at 8.5%, an owner-occupied property loan of $972,916 at 6.149%, and a second term loan of $398,178 at 6.149%.

Blended, the group was paying about 6.78%, roughly $126,800 a year in interest. Combined annual debt service ran near $210,000.

One of the three facilities matured within months. A maturity is a deadline: renew on the lender's terms, pay the balance out, or refinance somewhere else. Every week of waiting narrows those options.

The second problem was quieter. The group ran with no operating line of credit at all, so every seasonal swing, equipment repair, and payroll gap came straight out of cash. Flour, butter, and payroll do not wait for a strong month.

And the structure itself worked against the group. Each facility had been underwritten against the deal of the day, and none of them was priced against what the business had become: a nine-location brand run through an operating company and a holding company.

We read the file the way a lender reads it, and the read said the debt was fragmented, not the business. So we packaged the two companies as one credit, the operating company and the holding company together, and took that single file to the commercial banking group of a Canadian chartered bank.

The new structure came out in three pieces. The owner-occupied property loan moved to the holding company as a $972,916 term loan on a 20-year amortization. The $500,000 and $398,178 facilities were consolidated into one $898,178 term loan against leaseholds and equipment on a 15-year amortization. And the group got its first operating line of credit: $110,000 of working room it had never had.

All of it priced at commercial prime, 4.45% on the day the deal closed. The legacy lender was paid out in full.

The trade-offs are real, and we put them on the table before the client signed. Refinancing carries costs: legal work, appraisals, and the payout of the old facilities. Longer amortizations lower the payment, not the debt; carried full term, a 20-year schedule pays more months of interest than a shorter one. For this group, payment room plus a working line was worth that trade.

Same business, same assets, better structure. The blended borrowing cost dropped about 233 basis points, and annual interest fell by roughly $43,500, about a third.

Combined annual debt service went from about $210,000 to about $156,000. That put close to $4,500 a month back in the operating account, and for the first time there is a line of credit behind the group instead of nothing.

Those are this file's numbers on the day it closed, not an offer. Rates move, and every file reads differently.

Debt that accumulates deal by deal gets priced deal by deal. Nothing about this group changed except the structure of its borrowing, and that alone was worth about $43,500 a year.

If you are carrying term debt above 8%, or any facility of yours matures inside the next 24 months, have the file read before the renewal date decides for you. That is the work: read it the way a lender will, then take it to market as one credit instead of a stack of old deals.