Businesses often struggle with cash flow due to substantial capital being tied up in assets. Research by Ramco in 2022 found that UK businesses had a staggering £59 billion locked in unused assets and equipment. Time Finance offers Asset Refinance as a strategic solution, enabling businesses to unlock this capital and enhance liquidity for growth and stability.
Asset refinance allows businesses to release cash from assets they already own, whether fully or partially. By leveraging the equity in these assets, companies can secure financing without needing to sell them outright. This approach is particularly beneficial for businesses with valuable equipment, vehicles, or machinery, offering a structured way to improve cash flow while maintaining operational capacity.
The process involves a lender settling any outstanding finance on the asset and taking ownership before offering a loan based on its current market value. If a business already owns the asset outright, it can typically access a larger portion of its value. Several factors determine the loan amount, including the type of asset, its condition, age, and the business’s equity stake.
Asset refinancing provides numerous advantages. It frees up working capital that can be redirected into business expansion or investment. Businesses do not need to fully own an asset to refinance it, making it a flexible funding solution. Additionally, it offers the potential for better loan terms, lower interest rates, and extended repayment periods of up to five years. Unlike selling assets, refinancing allows businesses to retain ownership, ensuring continued use of essential equipment.
However, there are risks involved. The asset serves as collateral, meaning failure to meet repayments could result in its repossession, potentially disrupting business operations. Compared to outright purchases, asset refinancing can be more costly due to interest and associated service charges. Additionally, businesses must take responsibility for maintaining the asset, covering repairs, and ensuring adequate insurance.
Asset finance and asset refinance differ in their objectives. Asset finance is designed to help businesses acquire new assets without upfront costs, whereas asset refinance is used to unlock capital from existing assets. The latter is particularly useful for asset-rich businesses facing cash flow challenges, providing an avenue to leverage owned equipment for financial flexibility.
A wide range of tangible assets can be refinanced, including commercial vehicles, manufacturing machinery, and construction equipment. These hard assets serve as valuable collateral, enabling businesses to access funding for growth and operational needs.
Time Finance plc (LON:TIME) is an AIM-listed business specialising in the provision or arrangement of funding solutions to UK businesses seeking to access the finance they need to realise their growth plans. Time Finance can fund businesses or arrange funding with their trusted partners through Asset Finance, Invoice Finance, Business Loans, Vehicle Finance or Asset Based Lending.
