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A Guide To Asset Refinancing

What is Asset Refinancing?

When most people think of asset finance, they think of a case in which they obtain finance to buy new vehicles, machinery or equipment for their business. However, another option available is asset refinancing. This allows a business to re-finance an asset that they already own, which frees up additional working capital. As with asset finance, a business will then make agreed monthly payments over the next few years. Asset refinancing is often available on vehicles, equipment and machinery that was either previously financed, or on equipment that has been bought outright. Additionally, you may be able to refinance assets alongside other facilities such as Invoice Discounting, as you are refinancing a specific asset.

An important point to note is that asset refinancing is usually only available on assets that your company owns in full i.e. ones that are not currently financed.

 

Why is refinancing an increasingly popular option for businesses?

One of the main reasons that asset refinancing is so popular is because it allows businesses to free up working capital on assets that they are already using, whereas most of the traditional types of financing only offer financing on brand new machinery, equipment or vehicles that have not previously been used.

Another reason this type of financing is popular is because banks have very stringent lending criteria. This criteria has become even more stringent in recent years, meaning many businesses that require finance can no longer count on their banks as a financing option. In addition to this, some business owners find themselves in a position where they require cash quite quickly, and, providing the business meets the criteria set out by the finance house, approval can be quick. This means the business can often have their cash in a matter of days.

Many of the advantages that apply to asset finance also apply to asset refinance. For example, as we touched upon earlier, monthly repayments are made over an agreed term, and subject to payments being adhered to the terms of the agreement, the asset finance house can’t call this in early, unlike a bank overdraft, helping you to better manage your cashflow over the period of the agreement.

 

What information will the finance house require about the asset?

You will be required to provide your chosen finance house with information about the asset in question, your business, and information about yourself. One of the key differences with asset refinancing is that you will have to provide the finance house with detailed information about the asset that you want to refinance, especially proof of ownership, and the current usage of that asset, so that it can be accurately valued. Information required will include:

  • Make and model of the asset
  • Year of manufacture
  • Year of purchase
  • Usage in terms of hours or miles
  • Proof of purchase

 

What other information will the business wanting refinancing have to provide?

The finance house will require information to prove the identification of the person wanting to take out the finance, sometimes known as ‘Anti Money Laundering Information’. Based on the information provided, the finance house will then carry out a credit search using a credit reference agency. As much of this is highly personal information, the finance house will first request your permission before accessing any of this information, and will store data in accordance with the 1998 Data Protection Act. You can read more about this in our guide to personal information.

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