Explaining Refinance Asset Finance and How It Could Benefit Your Business

Looking for a quick cash boost for your business? But don’t have access to other types of finance? Refinance asset finance could be the solution that you are looking for. Continue reading to find out exactly what asset refinance is, the pros, and cons of this type of commercial finance and the process of securing a deal. Here you will find all the information you need to help you decide whether this type of finance is suitable for your business requirements. 

What is Asset Refinance?

Essentially refinancing an asset is borrowing money against an asset that you already own or partially own and is a type of asset finance. In the case of an asset that you own you can borrow money against the full value of the asset. This is a straightforward transaction involving you and the lender, and the item that you are refinancing as security. 

If you are refinancing an asset that is currently being paid for via finance, you can borrow against the equity that you already have in the asset. This type of refinance is slightly more complicated as it involves the new lender paying off the balance due to the existing lender, then lending your business a percentage of the equity already held. Once again, the asset that is being refinanced is the security against the loan. 

Benefits of Refinancing an Asset

For businesses that need to increase cashflow quickly, refinancing an asset could be the ideal finance option. Whether you need cashflow for expansion, to purchase equipment, to cover unexpected bills, to take on more staff, or complete an order this is a relatively accessible type of finance for any business that has available assets to refinance. Some of the benefits include: 

  • Asset is used as security
  • Flexibility 
  • Quick to organise
  • Fixed repayments
  • Ownership of the asset 
  • Cash injection into the business

As the asset is used as security, this type of finance is more widely available than a typical business loan and is a more viable option for businesses that don’t have an optimal credit rating. Flexibility is another benefit, as you can refinance various percentages of the assets value or equity depending on your requirements – but do note that the refinance amount is usually a maximum of 90-100% of the value/equity held. A few lenders will lend over 100%, contact MC Commercial finance who will be happy to help explore the deals available to your business. 

With the support of a dedicated commercial finance broker organising asset refinance can be a quick process, with funds usually available within a few days, although this can be as little as 24-hours in some circumstances. With fixed monthly repayments, this type of finance allows long-term cashflow planning, and after making all the repayments due under the loan the asset will belong to your business. Retention of the asset that you can continue to use for the purpose of your business, while also receiving the required cash injection makes this type of finance an attractive option.

Drawbacks of Asset Refinancing

As with all types of commercial finance there are also negative considerations that should be factored in when deciding whether to go ahead with this type of loan. Drawbacks include: 

  • Interest rates
  • Monthly repayments
  • Technically giving up ownership of the asset 

As with all types of business finance, interest will be due on the value of the cash advance provided from refinancing an asset. Interest rates on this type of finance are usually competitive and can range from 2-7%, however, the cost of interest should be factored in, as well as the fact that interest would have already been paid on the first finance deal. Asset refinancing involves taking on a monthly repayment commitment, analysis of the businesses ability to meet these repayments over the term of the loan should also be considered. 

Technically the finance company will own a portion of the asset until all repayments are made and defaulting on the loan could result in the asset being recovered. If the asset is essential to the running of the business and there is any doubt over ability to repay the loan this type of finance may not be a suitable option.  

Securing Refinancing of an Asset

Working with a dedicated business finance broker, such as MC Commercial Finance, is the ideal way to secure the best asset refinance deal for your business. We will listen to your requirements; our expert industry knowledge will enable us to match you with the most appropriate credit provider on the best available deal. We take care of the application process and know exactly what information and documentation will need to be provided, meaning that the entire process is as hassle-free as possible. Give us a call or send us a message today and let us help you to refinance an asset, and release valuable cashflow into your business.