Although essential for any business, the cost of investing in assets such as vehicles, machinery stock or premises can be considerable. As your business continues to grow, you will likely need to purchase more assets or bigger premises.
Alternatively, you may encounter a period of time where you feel the strain and need an extra cash injection into your working capital.
A common way of raising the funds to do this is to refinance your existing assets and free up the equity you have already invested. This type of funding allows you to use the equity that you have built up in your existing assets to raise funds, whilst retaining the full usage of the assets.
So, how does it work?
Initially, the finance company will value the assets that you have already. They will the ask you to raise an invoice for the value of the assets and then use a Hire Purchase agreement to finance the goods. Your business will then be able to repay the loan advanced against the assets on a monthly basis until you have repaid the agreement and the option to purchase fee.
There’s no limit to what these assets can be, and it depends on the loan size and lender, so it can range from premises to machinery and stock – as long as you own it, you can use it as security.
Whilst all of this is being arranged, you can continue to use the asset that you are refinancing as usual and, once you’ve finished paying the finance off, you will own it once again.
Is refinancing a popular choice?
Whilst the traditional finance routes only offer funding for new assets, refinancing is popular as it allows you to free up working capital that is otherwise tied up on assets that you already own.
With refinancing being relatively efficient, it can also be a good way of raising cash if you are in a position where you need a quick injection of cash into the business – be that for working capital or to purchase a new asset.
Will my business credit score play a part in my application?
As refinancing is secured against the asset, funders will often scrutinise that more than your financial past, so refinancing may be a good choice for you if you, as a business owner, or your business has had credit problems in the past.
When looking to refinance, our experts will assess your asset before ascertaining its market value to determine the funder and product that is most suited to you – though it should be noted that there are some funders that like to arrange their own independent valuation.
It should also be noted that, as your asset is being used as security for the money, if you fail to keep up your repayments, you could end up losing the asset.
Asset refinancing can be a simple and relatively straightforward way of unlocking tied up cash for your business, especially if your business is short on cash but has a large number of assets to use as collateral.
To find out how you can arrange refinancing, speak to one of our experts on 0333 444 0221 or email us at firstname.lastname@example.org.