Refinancing risk

A business may depend on new borrowing to repay maturing facilities or continue funding permanent assets. If credit markets tighten, a lender changes its appetite or the business's condition deteriorates, replacement funding may be unavailable or expensive. Short-term finance used for continuing needs can increase this exposure. Committed facilities, maturity diversification, liquidity buffers and appropriate long-term funding can reduce it, though each has costs and conditions. Refinancing risk concerns access to future funding and is distinct from the change in interest paid on an existing floating-rate facility.