Asset refinancing is an alternative funding arrangement that offers a way to raise cash against an asset your company already owns. You can refinance any single or multiple assets, and you don't even have to own the asset outright. Lenders can offer refinancing arrangements on the equity tied up in company property. Refinancing several assets is referred to as debt consolidation.
This type of financing can provide companies with much-needed working capital without the time-consuming process of applying for a traditional bank loan. You can also merge multiple loans into one easy-to-manage monthly payment.
If you have assets in your business, the lender can buy them back off you and lease them back to you with asset refinance.
Asset finance is the process of borrowing money to fund the purchase of a business asset.
The loan can be secured against the asset's value, which can be anything from plant and machinery to commercial vehicles or property.
Asset finance is a common way for businesses to spread the cost of large purchases, as it is often cheaper than taking out a traditional bank loan. The company can also use it to release equity from existing assets, which they can then use to fund growth or other business activities.
When you take out an asset finance agreement, the lender will provide the funds you need to purchase the asset. You will then make regular repayments over an agreed period, plus interest. The asset will usually act as security for the loan, which means that if you default on the repayments, the lender can take back the asset.
If asset finance/refinance is secured then your assets could be seized by the lender if you don't make timely payments.
Asset finance generally refers to using an asset as collateral to secure funding. Business owners can do this through a loan or line of credit; the asset serves as security for the lender if the borrower can't repay the debt. On the other hand, asset refinancing is the process of taking out a new loan to pay off an existing one, but using the same asset as collateral. Doing this can get you better loan terms, such as a lower interest rate, or tap into the equity built up in the asset.
Having assets can benefit your business but also tie up necessary funds that you can use for other things. If you have assets you know you can release funds from, you can use asset refinancing to get money from assets existing in the business.
An advantage of refinancing is that you don't need to own the asset to raise finance against it. If you've entered into an asset finance agreement, and haven't paid all of it off, you can get another.
The process of refinancing your assets begins with finding a lender who is willing to provide you with the loan you need. You then fill out an application, providing the lender with information about your existing asset finance agreement and the asset being used as collateral. The lender will then determine whether or not you are eligible for refinancing and, if so, what terms and conditions they can offer you. Once you have agreed to the loan terms, you will make repayments the same way as you would with any other loan.
The process of applying and receiving asset refinance is simple. You fill out a form with details of your assets and the lender then decides your eligibility status.
- Access to extra funds: Tapping into the equity within an asset can provide a source of funding for other purposes, such as business expansion or investment.
-Better terms: By taking out a new loan to pay off an existing one, it may be possible to get better terms, saving a significant amount of money over the life of the loan.
- Longer repayment periods: Asset refinancing can give you longer to repay your loan, making it more manageable.
- Consolidation of multiple loans: If you have multiple loans, asset refinancing can help you consolidate them into one.
-Flexibility: Lenders structure asset-based loans in many different ways to meet the borrower's specific needs. This can include customising the repayment schedule to match cash flow.
Asset refinancing is not without its risks, however. You may have to pay fees and closing costs when you refinance an asset, so it is important to make sure that the benefits of refinancing outweigh the costs.
The lender buys your asset from you and uses it as collateral. If you default on the payments, they can take it off you. This results in losing the use and ownership of the asset entirely, which is something to weigh up, as the loss of the asset may not be worth the extra cash it affords you.
-Real estate: This can include both commercial and residential property.
-Cars and other vehicles: This includes both new and used vehicles.
-Machinery and equipment: This can include everything from construction equipment to manufacturing machinery.
-Inventory: This can include raw materials, finished goods, or work in progress.
Asset refinancing can be used for a wide range of assets in your business.
Asset refinancing can be a great way to get better terms on a loan, consolidate multiple loans into one, or raise cash by borrowing against the value of an asset. However, it is important to understand the challenges involved and ensure that the benefits of refinancing outweigh the costs. When done correctly, asset refinancing can be a great tool to help you reach your financial goals.
