Refinancing (Capital Release) is a quick way to access the value of assets on your existing balance sheet and use that value elsewhere within your business – for example, to fund a deposit on new equipment or ease cash flow. Naturally you retain the asset. It works in almost the exact way that ‘equity release’ or re-mortgaging does for individuals, although it is available on plant and machinery and not just on premises. Of course the lender/funder requires repayment, which is one reason that it should not be entered into lightly. Advise from a professional funding broker can be invaluable here.

When it comes to equipment/machinery, a common method of raising finance is ‘Sale and HP Back’. This form of refinance can be used against most types of equipment, making it suitable for companies of all sizes, including limited companies and sole traders. In this case the lender purchases the asset and finances it back to you. You no longer own the asset per se until the end of the refinancing term. Repayments are calculated in line with the income stream that will be generated by the asset.

To summarise there are many benefits of refinance or capital release, some of the salient ones being:

  • Efficiency – You maintain uninterrupted use of the asset.
  • Spreading cost – The existing finance agreement can be replaced and the term can be extended with a new lender.
  • Choice – Your business will receive a cash injection, which can be used on other projects or you could use the money to buy other assets that may not be accessible through hire purchase or leasing agreements.
  • Make fast decisions – The capital released can help you make faster decisions when negotiating business contracts.

The terms, of course, are crucial. As we have said many times in this blog, you are the expert in your own business, it is doubtful that you are an expert in sourcing funding too. We always recommend that companies use the services of an experienced broker when entering into any funding contract. Most brokers will have access to a large number of lenders and will be able to secure for you the best repayment terms.

Contact us today

Let us reduce the risk and save you time and money sourcing funding for your business!

SME funding UK Ltd is authorised and regulated by the Financial Conduct Authority (772970) and we are a Member of the National Association of Finance Brokers (M/0122/16)

We are also registered with the Information Commissioner’s Office (ZA209808)

Please note SME funding UK Ltd are brokers and not funders themselves.