Refinancing is a quick and easy way to inject cash into your business. You can refinance equipment free from finance or subject to an existing finance agreement through us, so long as there is sufficient equity in it.
Condition and value
It probably won’t surprise you to learn you can’t refinance any old equipment. For refinancing, the equipment has to be in a saleable condition, which is obviously a variable term: you can sell an industrial lathe in used ‘rough’ condition but not a shop facing which will need to be near mint. The asset must also have an adequate Minimum Future Value, so the lender can recoup all unpaid debt if needed.
When you refinance equipment, you will receive a cash lump sum directly into your business bank account just as you would with a standard loan.
It’s important to remember that while most lenders will consider new, second-hand and used assets for refinance if they hold value, their condition will affect their resale value, and in turn, the amount of cash you can release from them.
Better condition equipment will obviously command a higher resale value, and many lenders will require equipment to be in a certain condition. This is why they assess assets in person. The assets lenders usually work with are new assets, but second-hand and used assets are considered if they hold good value. An assessment is carried out to determine the nature of the equipment, its value and resale potential.
Selling and hiring back
By refinancing your equipment, you release the value of the asset while keeping it deployable in your business. In other words, you keep hold of the equipment in question for the duration of the term. This means you can release the value of your most valuable, operation-critical assets without giving them up, but only on the proviso the equipment is in a good, saleable condition. Hence the condition clause.
“Selling and hiring back” is a good way to think of refinance because you are selling the equipment to the lender – ownership passes to them until you repay what you borrow plus interest. However, you keep hold of the assets. Legally, you are hiring them back, and so are also tasked with maintaining and keeping them.
The amount you can borrow depends on the estimated value of the asset in question and also what percentage of the value the lender will lend.
You see, not every lender will offer a 100% value loan (100% of the value of the asset). High-street banks usually cap it at 80% which does leave a significant amount on the table. We allow you to release 100% of the valuation of your assets, so if we say they’re worth £50,000 you can borrow that and repay over a term that suits you.
To find out more about refinancing your equipment, condition and payment terms, speak with one of our experts. Call us on 01234 240155 to get started.