Asset refinance is a funding tool in a SME’s armoury that an increasing number of businesses are taking advantage of, yet there are still a significant proportion that are not aware that this option is available to them.
Taking on additional unsecured debt is a route that many firms, especially in the current climate, might want to avoid. But, with asset refinance, you are making use of something your business already has and using equity held in your assets without restricting their usability.
In short, with asset refinance it is possible to unlock the value held in your business’s vehicles, equipment and machinery to make use of right now. The working capital that this will release to your business could be used to boost cash reserves, plug a cashflow shortfall, or allow your company to capitalise on an investment, expansion or diversification opportunity.
The ‘Refinance 3 Rs’: review, release, reduce
A simple way to assess whether asset refinance could assist your company, is to consider what at Praetura we have termed the ‘Refinance 3 Rs’:
- Review the hard assets that your business owns, and by ‘hard assets’ we are talking about cars, vans, trucks, construction equipment, machinery etc. How much are they worth and how much equity are they holding?(This is applicable whether they are owned outright or currently being financed by a finance lease or hire purchase agreement).
- Release – utilise an asset refinance agreement to release the equity those assets hold, to provide your business with an immediate injection of working capital.
- Reduce – if any of those assets are currently being financed by a hire purchase or lease agreement, these could be consolidated. There is also a strong possibility that your monthly payments could be reduced as a consequence, providing an ongoing increase to your bottom line.
Case in point
To give an example of the ‘Refinance 3 Rs’ in action, we can look to the Refinance Redraw Facility we recently put in place for on of Praetura Asset Finance’s existing customers.
The client was a property developer who had had to pause a major project during the lockdown and needed working capital to enable the work to be completed.
- Review – The company had three pieces of construction equipment that were over halfway through a hire purchase agreement with Praetura.
- Release – We were able to arrange a Refinance Redraw Facility for the client. The value in the assets meant that we released a capital lump sum of £35,000 from those assets.
- Reduce – By extending the term with the new agreement, we were also able to reduce the monthly payments by over £450 per month.
The property developer now has sufficient funds in place to pay for the supplies and support necessary to enable the project to be finished and has saved over £450 per month too.
Find out more
At Praetura Asset Finance we have built a strong reputation, not only for the way we approach asset finance as a partnership arrangement to assist SMEs make the most of the resources available to them, but particularly because of our expertise in the field of asset refinance.
Our team of experts are here to help you; please don’t hesitate to get in touch to find out more, by calling 0333 323 7830 or emailing firstname.lastname@example.org.