Asset refinance allows you to access a cash lump sum using the equity value of assets already on your balance sheet. This can be useful if you want to put down a deposit on a new piece of equipment, for example, or simply to ease cash flow and boost available working capital.
You can refinance an asset even if it is not wholly owned by your business. The amount of equity available is a key factor in determining how much money you could borrow against the asset, if you do not own it in its entirety.
Sometimes called a sale and lease back arrangement, the lender establishes how much equity remains in the asset and offers a percentage of this figure as a lump sum. If you wholly own the asset, you should be able to borrow a higher percentage.
For partially owned assets, the refinance company pays off your original lender and advances the lump sum under the agreed terms. The proportion a lender is prepared to advance depends on the type of asset, its condition, and age.
Repayments are calculated based on how much income is likely to be generated using the asset, and refinancing typically takes place over a period of five years but this can depend on your business needs. Once the agreement ends, ownership generally reverts to your business.
Is asset refinance a good option for your business?
Asset refinancing may be a suitable option if your business is asset-rich but cash-poor. Leveraging the value of your balance sheet assets in this way releases valuable working capital and can help you grow your business sustainably.
You may want the cash to purchase a number of smaller assets, perhaps those for which hire purchase or lease arrangements are not available. Asset refinance would also be worth considering if you want a cash injection to boost working capital, or to cover an unexpected cash shortfall.
It provides an alternative line of credit without affecting existing bank financing, and does not rely on your credit rating or business performance.
Corporate Restructuring Options
When a company is in difficulty, sometimes a process of financial and/or operational restructuring is needed. From CVAs through to Administration, there are a range of rescue and recovery options to help you get back on track. Learn more about restructuring by calling our team - 0800 644 6080
What are the advantages of asset refinancing?
Your business enjoys continued unrestricted use of the asset as long as you meet the lender’s terms and conditions
You can budget effectively as the financing terms are fixed
The lump sum injection boosts your cash flow
You regain ownership of the asset at the end of the term
If you are not eligible for an unsecured commercial loan, asset refinancing offers a straightforward alternative
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The loss of ownership during the term of the loan may be seen as a disadvantage, but as ownership reverts to your business at the end of the agreement, this may not be an issue.
If you would like to find out more information on asset refinance and how it could help your business, Real Business Finance can help. We are commercial finance experts and will ensure you understand all your options. Please call one of the team to discuss your needs and arrange a free initial consultation.