What is refinancing?
In the case of asset finance, a client can refinance an existing asset to raise capital. This will then allow you to access and finance new assets. This asset could be unencumbered, meaning fully paid off already or one on finance with equity in it. Refinancing can also be used to access money for a balloon payment. This balloon payment can then be used to pay off and clear a normal agreement. Refinancing could be a good idea for you if you need to access equity that is already tied up in assets. By selling the existing asset to a funder you will be able to release capital. Refinancing can be done in the form of Hire Purchase or Finance Lease. Both formats start with the sale of the asset and then are paid back under the terms of a hire purchase or a finance lease.
How does refinancing work?
Refinancing is the act of selling an existing asset to a funder to release the capital. It is normally only available on assets, such as equipment, that your company already owns in full- although there can be exceptions to this. That capital, once released, is then able to be used to cover other large costs or investments. The asset does stay in your possession until the end of the agreement and is fully passed back as the agreement terminates. As with other forms of asset finance, the business is contracted to the agreed monthly payments. Refinancing can be done in the form of Hire Purchase or Finance Lease. Both formats start with the sale of the asset and then are paid back under the terms of a hire purchase or a finance lease. The asset use could be unencumbered, meaning fully paid off already or one on finance with equity in it.
What is refinancing good for?
Refinancing can benefit people in an array of ways. Refinancing can allow you to release equity that is tied up in existing assets which can then be used in other areas of your business. This is a great way of injecting money into your business when you really need it. Businesses can often find that lending processes are complicated and time consuming but refinancing can be a simpler, more streamlined alternative to these processes. By allowing businesses to put their money into different areas of their business that require move funding or investment refinancing can be a great option for businesses that don’t want to take out a full loan. One example of how you could benefit from refinancing is by accessing capital that can then be spent on expanding and evolving your business in a new or different direction. Another example of when refinancing could benefit you is if you are starting off a new contract with a 90 day payment term and need additional financial support to uphold this. It is common that businesses will use financing for ‘Soft Assets’ such as IT equipment and technology. This is popular because this sort of equipment is a large investment especially for a smaller company but the benefits are incomparable. This means that the
benefits you could gain from access to these soft assets much outweigh the expense of the payments. Refinancing also gives your business flexibility to upgrade to newer technology when it becomes available. Parkins Finance are able to help you analyse the options available as well as your own financial health to arrive at the right decision for you.
Why should I consider refinancing?
You could consider refinancing if you could benefit from releasing equity that is tied up in existing assets to then use it in other areas of your business. This is a great way of injecting money into your business when you really need it. You could consider refinancing if your business could benefit from decreasing your monthly payments, raise capital or accessing funds for a balloon payment. This balloon payment can then be used to clear off the cost of a another agreement. You can use refinancing to suit your individual needs and situation. It can be done in the form of Hire Purchase or Finance Lease and both formats start with the sale of the asset and then are paid back under the terms of each respectively.
If you are considering refinancing or are interested in hearing more, Parkins Finance can advise you of the best options for you to ensure that you get the best rates and sustainable monthly payments. Our expert finance brokers are here to guide you towards the best financial decisions for your individual needs.