What is Refinancing?
Refinancing refers to a type of Asset Finance which allows for large sums of money to be borrowed and secured against the value of assets on your business’s balance sheet. This effectively releases the cash tied up in your capital assets and allows for expansion or the obtaining of new business. Your business can then repay the loan in instalments over a period of time, allowing for simple budgeting and forecasting going forwards. Refinancing your business’s assets will not affect your usage of them and trading can continue as it would normally.
How does Refinancing work?
You produce a forecast in order to determine how much funding your business will need in order to put it in the cash flow position required. Your initial funding line is then set up to accommodate the highest predicted level and secured against an asset or assets. Your business can then dip into this funding in order to acquire new assets and make monthly repayments. This line of funding may be increased at a later date if necessary, subject to credit approval.
The benefits of Refinancing
- A flexible means of borrowing – Refinancing can be used as a revolving facility, meaning that the maximum amount of cash your lender is willing to allow you at any one time is agreed and secured against the value of your asset(s). This is referred to as a line of credit or a line of funding. You can then borrow and repay cash from this fund up to the limit.
- Instant capital to fund growth and change – Refinancing your businesses assets is a fast way to release cash in order to fund growth and purchases. Refinancing can even be used as part of a financing package in order to fund mergers and acquisitions. Once approved, your line of funding will be set up straight away and you will be able to access your released cash.
- Releases a significant cash lump – Refinancing can facilitate the borrowing of large amounts of capital, ensuring that your business has the cash required to expand and move forwards. What’s more, once your business acquires more assets, these too can be refinanced in order to increase the amount of funding available to you.
- A cost effective solution – Refinancing is a cost effective means of generating capital and the ability to spread repayments over a period of time maximises its affordability.
- Continue to trade as usual – Refinancing will not affect the use of your businesses assets and you can continue to use them in the same way as you did before.
Who is Refinancing for?
Refinancing is most useful for businesses which have unencumbered capital assets on their balance sheet and wish to use them to generate cash. It is ideal for manufacturers and distributors, for example, who often have to invest in materials, inventory or technology months before payment is made. If your business is in such a situation and is looking for a way to finance expansion or capitalise on a business opportunity, then Refinancing may be the perfect solution. Not only will Refinancing instantly enable you to borrow a large amount of cash, but once your assets grow you may increase your funding line appropriately, subject to credit approval.
Other forms of Refinancing
Refinancing against unencumbered assets is an effective method of raising capital and boosting cash flow, however another alternative is to enter a “sale and leaseback” arrangement. In this situation your business sells the assets it wishes to refinance to the lending company and in turn, they lease it back to you over an agreed term, at the end of which, your business will have the option to purchase it back often for a nominal amount. Contact Wffinancesolutions.co.uk for more information on sale and leaseback arrangements.
How can Wffinancesolutions.co.uk help?
Wffinancesolutions.co.uk has years of experience working with businesses just like yours and advising on Refinancing solutions to fulfil a range of requirements. The relationships we have developed with the providers we source means that often, we can negotiate a better deal than if you were to visit them directly. For more information about Refinancing your assets, or to see how it can be of benefit to you, get in touch today to arrange a free no obligation consultation.