What is an Asset Refinance?
Asset refinance is a method of releasing money from the items on your balance sheet, allowing you to use the funds elsewhere in your business.
Owners can use asset refinancing as a method of raising capital for their company. It can be used to raise working capital, cover and funding shortfall, or to free up cash for new purchases.
Refinancing assets is simple and can even be used on equipment or machinery that already has finance outstanding on it. The key to raising funds through this method of asset finance is the amount of equity available.
Asset refinance will usually allow you to release a set percentage of the item’s value. The exact percentage will depend on what equipment you’re looking to refinance and its age.
The Advantages & Disadvantages
Are you looking to refinance an asset to free up capital for other areas of your business? Here are the pros and cons of using asset refinancing.
- It allows you to raise money for your business while still enjoying use of the asset.
- Asset refinance can be an excellent option for companies who do not qualify for unsecured business loans.
- Provides a cash injection, which can be used to benefit your business.
- Repayments are usually fixed, meaning you know exactly what you’ll have to pay each month.
- You will no longer own the asset (until the end of the term).
- You will have to make monthly payments in order to continue using the item.
How Does It Work?
Once you’ve decided to raise finance for your asset, we will scour the market for you to secure the best possible terms for your business. Once you’re satisfied, the sale will be agreed to the finance company, who will immediately lease back the item to you.
The finance agreement will usually consist of a five year term. Although, this can be agreed individually depending on your needs.
At the end of the agreed term, ownership of the item will revert back to your business.
Is an Asset Refinance the Best Route For My Business?
Asset refinancing can be used to benefit businesses in many ways. Funding is often available through this type of finance that would otherwise not be possible through unsecured business finance products.
Businesses that are asset rich but in need of a fast cash injection should definitely consider this method of funding.
What Information Will I Need to Provide?
In order to assess your application, we will require the following detail about the equipment:-The make and model of the assetYear of manufacture and purchaseProof of purchaseMiles or hours used (if appropriate for the asset)Details of your business and its shareholders/directorsAccounts for your business
What are the Alternatives to Asset Refinancing?
Asset refinance can be a solid option when looking to raise capital for your business, although it isn’t the only option available to you.
The options available will depend on your business, your background and how you take your payments. The main options available are the following:-
Business Loans: These can be used as a fast way to secure cash for your business and unsecured loans require no security for the lender other than a personal guarantee (in most cases). The rates charged can be a little higher, but they can be ideal when you’re looking to raise more funds than you can back with your assets, or you do not want to give security over your assets.
Invoice Finance: When significant sums are invoiced on delayed payment terms each month, invoice finance can be a strong option for business owners. Invoice finance allows you to get paid a percentage of your invoice on the day it is raised, rather than when the invoice is paid. We can usually secure 85-90% of most invoices.
Merchant Cash Advances: Where payments are often taken via a card terminal/EPOS system, borrowing can be arranged against future card receipts. This is paid into your account as a lump sum and is repaid daily at a pre-agreed percentage of your card takings for the day.
Can Asset Refinance Be Combined with Other Types of Finance?
Yes, where funding is required for more than the value of your acceptable assets, we can work with multiple lenders to secure a blended finance package for you.
After your initial consultation call with your business funding expert, they will be able to advise you on the right package for your business.
What Assets Can I Refinance?
- When working with clients, we’re happy to consider any asset. The key to a successful application is providing a tangible asset which will hold some residual value, which could be realised by the lender in the event of default. Example of strong assets include:-
- Agricultural equipment
- Manufacturing equipment
- CNC equipment
- Gym equipment
- Printers and office equipment
- Catering & industrial kitchen equipment