How equipment and machinery refinance works

The equipment you have in your business is literally part of the furniture, assets that you take for granted in your everyday operations, and if you have an on-going loan agreement for your machinery it is something you make ignore letting it run in the background. Why think about it?

Well, through equipment and machinery refinance you might be able to unlock dormant capital tied up in your existing equipment assets! Depending on the assets you have this capital could run from a few hundred pounds to millions.

Should the value of the equipment exceed the value of any associated finance, there is equity to release in that equipment. That equity can refinance existing debt, free up working capital, reduce monthly repayments and find funds to pay for business expansion.

How does equipment refinance work?

Refinancing is where existing equipment is used as collateral for a new loan, or to consolidate or replace an existing finance agreement. New loan obligations can free up funds and reduce monthly repayments.

Of course, refinancing isn’t the right move for everyone. It is important to estimate the equity in the equipment as this is based on the actual value of the assets and not the book value. Also examine the new repayment figures with the help of a lender, against the current repayments to see how much of a saving you will make overall.

As with any financial decision, do thorough research before entering into refinance. It is best to speak to experts in the field of refinancing equipment before progressing.

How much can I borrow?

With equipment refinance your “loan ceiling” is the value of your assets or equipment. For example, if your cutting machine is worth £20k, in most cases you’ll be able to release £20k. While many lenders will allow you to borrow up to 100% of the value, not all lenders are this generous, so this is just a guideline.

Lenders will lend based on how they view your business requirements and the loan will release the amount you need. In all cases, your first move is to get your equipment valued.

Once a loan is repaid ownership of the equipment passes back to you in most cases. Like a regular loan, repayments are usually made monthly plus interest. There are many different refinance packages available on the market including three-year, four-year and five-year arrangements (sometimes shorter or longer but this is a good guide).

When taking out shorter-term loans, you will pay less interest overall but the repayments are likely to be much higher so ensure that you can successfully meet the repayment requirements.

Equipment refinance is a popular and effective form of machinery finance for businesses to release funds they need to progress, allowing the equipment to stay in the business and eventually regain or complete ownership once everything is paid off.