Another style of asset finance is asset refinance. It allows you to utlilise assets that you own, in order to release equity. If you are a business with high value assets logged on your balance sheet, then asset refinance may be for you.
In order to assess the value of an asset and therefore how much cash can be released, a lender will come and inspect and value your asset. The process then involves temporarily transferring ownership of the asset to the lender; however, you will still be able to use the asset for your business without interruption.
Because asset refinance is equity based, you use the asset as security, and therefore, eligibility depends on owning an asset.
You must be able to present detailed information about the asset that is being refinanced as most lenders will require proof of ownership, current usage, and any relevant particulars, such as the year of manufacture, make and model in the case of equipment and vehicles.
There can be drawbacks. By refinancing your asset, you no longer technically own it until you reach the end of the term, and you will have to make monthly payments to continue using the item.
The lender is likely to give you a better rate for hard assets as opposed to soft assets. It can also depend on the asset’s condition, age, and whether it is owned wholly or partially by your business. The interest rate on the facility can range between 2% to 7%. In terms of time frames, this all depends on the financier, but it can range between one and seven years. The main benefit of asset refinance is the fact that it is freeing up cash based on assets that you already own, and in that sense, it is an efficient method of creating working capital.
Business loans may be taken out for several reasons such as the need to maintain business operations, invest in equipment, or other manners to advocate growth. They are both beneficial for businesses and usually easy to obtain due to the multitude of lenders.
6 Key Reasons Why Asset Finance Can Help Your Business Grow in 2022 Today we look at why asset finance can help your business grow.