Are you thinking about turning the equipment you already own into a cash boost for your business?
That’s exactly what asset refinancing lets you do. Essentially, your lender buys your equipment and leases it back to you. You keep using it all the while paying them back in manageable instalments.
Read on to explore more about what asset refinance is, how it works, and its benefits.
What is Asset Refinance in the UK and How Does It Work?
Here’s a bit more detail on how it works:
- What’s up for grabs? It could be any equipment you have. For example, you might want to refinance machinery or perhaps a company car.
- What’s it worth? How much cash you get depends on what the equipment is, how old it is, and how much of it you actually own.
- Who keeps it? Legally, the lender owns it for a while, but don’t worry – you carry on using it like normal.
- What about after? Once you’ve paid off what’s due, ownership flips back to you.
Good to know: Since this is secured funding, if you can’t meet the payments, there’s a risk you could lose the equipment.
Who’s Asset Refinance for?
It’s pretty much for anyone in business who wants to make their existing assets work a bit harder for them. Maybe you’ve already paid off your equipment. Or perhaps you’re still making payments. Either way, refinancing can be a brilliant way to grab some extra cash for things like buying new apparatus or covering other business expenses.
It’s super flexible, too. So, it doesn’t matter if you’re flying solo or you have a sizable setup.
How Asset Refinancing Might Fit into Your Business Plan
Let’s say you own a bakery. You have a high-end commercial oven that’s essential to your operations. With your business doing so well, you’re all set to open another location. Instead of a regular loan, you think, why not use the equity in your trusty oven?
You give us a call, and we sort out a deal to buy the oven and rent it back to you. This way, you get the cash you need without losing your essential equipment. You get the cash up front, which you can use to fund your new shop, and you pay a monthly ‘rental’ based on your profits.
At the end of the term, you regain full ownership of your oven. It’s an incredibly clever way to finance your expansion without outright expenses.
What Is the Difference Between Asset Finance and Asset-Based Lending?
Asset finance (otherwise known as asset-based refinance) is a way to get a loan using the equipment you already have – you keep using it while paying the loan back.
Asset-based lending is a bit different. You get to borrow more money by using a fuller range of assets, like what you have in stock or money owed to you, to support bigger business ambitions.
Benefits of Asset-Backed Financing
- Quick cash injection: It’s a direct way to boost your cash flow while keeping your gear.
- Partial ownership, no problem: Haven’t fully paid off your equipment? No trouble at all, you can still go for refinancing.
- Flexible payment terms: You can spread your payments over up to five years.
- Credit issues? Generally, not an issue – you can still access this type of financing.
- Extra perks: You could lower your monthly outgoings and free up cash for new equipment or other big business moves like paying deposits on new assets or funding company expansion.
Things to Keep in Mind with Asset Refinance
Thinking about equipment refinance? Here’s what to keep in mind:
- Stick to the plan: Make sure you can keep up with payments because falling behind could mean saying cheerio to your equipment.
- You’re in charge: Even though the lender technically owns the asset for a bit, you’re responsible for its upkeep, repairs, and insurance.
- Costs: Sometimes, borrowing against your assets might cost more in the long run due to interest and service fees.
Weigh the immediate benefits against potential long-term costs.
The Takeaway
Thinking about freeing up some cash or making your business cash flow better? Asset refinance could be the smart move you need to make. It allows you to make the most of the equipment you already own to help your business grow or see it through tough times. Just double-check that refinancing fits well with your financial strategy and always stay sharp about your payments.
Keen to explore more or need a bit of help? Check out our asset financing solutions – we’re here to help you work out the best financial moves for your business’s future. Give us a shout now.