Asset Refinance

Asset Refinance – A Simple Way to Put Your Assets to a Better Use

At any point during the lifetime of a business, a large percentage of the market value of the business remains tied up in various assets. Discounting prime assets such as land and other properties, there exist a number of valuable assets that a business may own.

These assets are essential for the daily operations of the business. However, the capital stuck within these assets is often more than the business can afford. In such cases, the business can choose to refinance such assets to free up the working capital.

Please visit this page to compare various types of Asset Finance.

What is Asset Refinance?

Asset Refinance is a popular financing tool that allows businesses to optimise the value of their assets. You, as the borrowing business, can choose to refinance assets like vehicles, equipment, machinery or raw materials so as to lease them back from the buyer. To be able to refinance an asset, the borrower needs to own the asset wholly or in part. Most lenders agree to refinance assets if the borrower’s equity in the asset is in excess of 50%.

It is also common for businesses to refinance assets that are already financed under Hire Purchase Asset Finance.

Asset Refinance – How Does It Work?

Asset Refinance is a specialty financing tool. We have detailed on this page how Asset Finance works. The working of Asset Refinance follows a more or less reverse order.

Choosing the Asset to Refinance

Your choice of the asset will determine the net working capital boost you can generate from refinancing. Typically, it’s advisable to choose an asset that you wholly own. Many businesses also prefer to refinance assets that depreciate at fast rates. For example, vehicles and electronics.

Finding Interested Refinancers for the Asset

This is where Commercial Finance Network’s vast experience and resources prove to be an asset in itself. Once you submit your Asset Refinance application to us, we’ll review, add the necessary detail around what the lenders wish to see and then forward it to specialist refinancers whom from experience we know are best placed and most likely to want your business. The refinancers then review and extend their offers back to us, which in turn we then communicate to you.

Agreement in Principle

After reviewing all the offers, you can choose the one that addresses your needs the best. We then help you draw an Agreement in Principle for the refinancing of the asset.

Lease Back

Once the refinancing agreement is in force, the ownership of the asset changes hands. Now, the refinancer will own a certain equity in the asset, as per the deal. This will allow you to generate lump-sum working capital that was previously tied up within the asset. The refinancer then immediately allows you to lease the asset under a Finance Lease or Operating Lease.

Monthly Rentals

Once you have leased the asset back, you will have to make the fixed monthly repayments as per the AIP. At the end of the lease term, the refinancing process concludes.

Benefits of Asset Refinance

Asset Refinance has many features that businesses of all sizes can benefit from. The most prominent among these are detailed below.

Easy Access to Working Capital

Working capital wields enormous power over the performance of any business. Much the reason why, businesses need to constantly explore opportunities to enhance their working capital. For small and medium sized businesses, getting a working capital loan isn’t always easy. Asset backed loans can be of help in such cases, but such loans tend to be interest heavy. Asset Refinance lets your business unlock the potential of the assets you have already invested working capital in.

Your business can divert the additional working capital towards other heads such as reinvestments, overdraft settlements or marketing.

No Risks of Ownership

With Asset Refinance, your business can transfer the onus of the ownership to the buyer. This saves you from the adverse impacts of asset depreciation. For expensive assets, these savings could amount to thousands of pounds.

Getting the Asset Off Your Books

Asset Refinance allows your business to remove the asset from your books. This can translate to easier management of your profit and loss accounts. Additionally, the monthly rentals can be effectively offset against taxable profits.