Asset finance is a type of loan that involves using an asset as insurance when taking out a new Finance agreement.
Asset refinancing is when a pre-owned asset is sold to a lender, then leased back to the borrower.
What’s the difference between asset finance and refinance?
Asset refinancing is all about releasing funds from the property you already own. Instead of using an asset as insurance to take out a new loan agreement, with asset refinancing you sell the ownership of your asset to a lender and form an agreement in which they lease the asset back to you over the period of the agreement.
An example would be; A Car garage may own an expensive car lift that’s essential to their day-to-day running. If the garage found itself in need of funds needs to purchase a new machine in order to cope with the demand, then it could form an asset refinance agreement with a lender.
The Garage would sell the car lift to a lender as part of an agreement which would see the lift leased back to the shop.
What are the benefits of asset refinance?
-For a lender
Asset refinance could be an appealing for the lender. Having an asset secured against a finance agreement can reduce the level of risk you’re taking by lending money and could sell the asset if the borrower could not make repayments.
-For a borrower
The borrower could get a much-needed cash flow injection in a situation where their business’ health or longevity may seem threatened. Releasing cash tied up through their assets and refinance equipment to grow the business.
There are limitations to how useful an asset refinancing agreement can be, though. If the car lift is only worth £5,000, then is unlikely that they won’t be able to borrow much more than that amount. Refinancing is always limited by the value of the asset.
If your company is in need of cash flow, and is not in a position to make large purchases up front, asset refinancing could help you to release cash quick. The chances are that this type of agreement will be more expensive than simply buying an item up-front, but it could provide less pressure in the short term.
Please take a moment to read our eligibility criteria below before heading over to our site.
Our business loans range from £10,000 to £750,000 and can be repaid over a 1 to 5 year time period- meaning you can choose a loan repayment plan that works for your business and its working capital.
-A sole trader or Director of a UK Limited company.
-Over 18 years, a home owner and a UK resident.
-Have been actively trading for at least 12 months
-Turning over more than £25,000 per annum
(All new start companies we can accept however the loan will need to be secured)