What is Asset Refinancing?
Asset refinancing is where an asset, that is already owned by you, is used to raise capital against it.
This allows a business to raise capital against goods already owned. Asset refinancing is often available on vehicles, equipment and machinery that was either previously financed, or on equipment that has been purchased outright. The finance deal is then structured and treated like any normal asset finance deal, ie agreed monthly repayments over an agreed term.
An important point to note is that asset refinancing is only available on assets that you own outright, and that are clear of any liability. Therefore, if there is any outstanding finance attached to the goods, the finance would have to be settled off first in order to provide the new funder with clear title to the goods.
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, therefore the goods or equipment are known and considered fit for purpose.
Traditionally, banks have very stringent lending criteria; meaning many businesses that require finance can no longer count on their banks as a financing option, as many will only offer finance on brand new machinery, equipment or vehicles and not on second hand or used goods.
In addition to this, if cash is required quite quickly, banks can be very slow in approving a deal whereas finance houses generally can approve a deal much quicker, this means the business can often have their cash in a matter of days as opposed to weeks.
What information will the finance house require about the asset?
With re-financing assets, the key element will be to be able to show ‘proof of ownership’. Clear title must be proven before an asset can be re-financed. Other details required will then be the same as if a new item was being purchased from a third party.
What other information will the business wanting refinancing have to provide?
The finance house will require the same information as any other type of finance being offered, which would include :-
- Proof of Identity
- Accounting Information
- Details of Goods
- Serviceability, etc