Equipment Refinancing On New And Used Equipment From $50,000 To $5,000,000
Call 289 816 0075
From the desk of:
Brent Finlay CPA,CMA MBA
Business Financing Specialist
BFE Financial Services
Call 289 816 0075
If your looking to refinance equipment you currently own to free up capital for your business, then I suggest you call me at 289 816 0075 for an immediate free assessment of your equipment refinancing options.
Equipment Refinancing can be used to ...
- Generate Working Capital
- Lower Interest Rates
- Extend Financing Terms
- Consolidate Debt
- Manage Balloon Payments
- Upgrade Equipment
- Assist with Tax Planning
Regardless of the use of funds, equipment financing can be an excellent source of capital, drawing on the equity you have in equipment, and can even be done on equipment you still owe money on if their is enough equity to draw from.
Equipment Refinancing is available for long life assets that have an established resale market.
The Most Common Asset Types for Equipment Refinancing come from the Following Industries ...
- Construction
- Transportation
- Manufacturing
- Agriculture
- Forestry
- Mining
To find out your available equipment refinancing options ...
... give me a call at 289 816 0075 so we can quickly go over how much refinancing you require, review the equipment you have available for refinancing, discuss equipment refinancing options, and layout the process that is required to complete your equipment refinancing request.
Alternatively, you can click this link and send me a note with an outline of what you're looking for, or to schedule a time to talk.
The best way to find out how it works and what options are available is through a phone call where we can have a verbal discussion and avoid you having to fill out forms or send in a list of supporting documents to start with. That may all be required, but let's first review the options available as quickly as possible before getting into the application and funding process.
Give me a call today at 289 816 0075.
I look forward to speaking with you.
Brent Finlay
Equipment Refinancing Can Be A Great Source of Additional Capital For Your Business
Refinancing business equipment is a management decision that can be undertaken for a number of different reasons with the most common reasons related to improving business cash flow. The opportunity to refinance comes from owning long life assets that depreciate at a relatively slow rate versus the amount of time that it took to pay for the equipment in the first place.
As a result, long life assets that have a usage and maintenance schedule that promotes long life can be considered for equipment refinancing.
For example, equipment from construction, manufacturing, transportation, vocational truck, logging, agricultural, and mining industries commonly have examples of equipment items that hold and can even increase their value over time in some situations.
In addition to long useful life, any equipment that can be refinanced will have a well-established resale market with predictable timelines and values related to resale. If you offer equipment with this type of profile (long useful life, established resale market, acceptable industry), finance companies will be more likely to be interested in offering equipment refinancing to your business.
In addition to providing an injection of capital into a business, equipment refinancing can also be undertaken for one or more of the following reasons.
1. Lower Interest Rates
It can be possible to take advantage of lower interest rates through a refinancing activity where you’re basically moving from one lender to another. That being said, it can be difficult to have the necessary circumstances for this to occur which would include 1) current rates are lower than the interest rates that apply to your current financing contract, 2) current financial and credit status likely need to be the same or better than when initial financing was obtained, and 3) any change over fees such as prepayment penalties, administration fees, appraisal fees, legal fees, extra have to be collectively lower than the gain from a lower rate of financing.
2. Extended Repayment Terms
Because equipment refinancing is typically arranged with long life assets, its possible in many situations to take an existing debt against one or more pieces of equipment and refinance the debt over a longer period of time, reducing payments in the process. This can be done in conjunction with also increasing the borrowing amount, and taking advantage of lower interest rates.
In the end, cash flow management, which is typically at the center of equipment refinancing, is driven by the need for cash now or in the future to run and/or grow the business. When equipment refinancing is used to generate incremental capital for the business, the interest rate and loan terms should also be considered at the same time so that everything can be optimized as much as possible.
3. Consolidation of Debt
There can be numerous reasons to consolidate debt into a new business loan through equipment refinancing and it once again can be a combination of consolidation and incremental capital creation. Debt consolidation can involve combining existing equipment loans, but it can apply to pretty much any debt that the business has outstanding from government remittances to trade credit to anything in between. While it can be argued that companies will consolidate debt to simplify administration and loan management, the main reason is going to almost always relate to 1) managing the existing debt on the balance sheet, and/or 2) generating more capital for operations and/or growth.
5. Managing Balloon Payments
Some equipment loans may have balloon payments due at the end of the financing term, requiring the business to pay a large sum of money at once. Depending on the long facility, the balloon payment can come with one or more options. A typical scenario would provide the business with options such ass 1) repay the balloon payment in full, 2) give the equipment back to the finance company to cover the balloon payment, 3) extend the financing period to amortize the balloon payment over additional year(s).
With long life assets, most businesses want to retain the equity built up in the equipment as the loan has been paid down, so they will typically refinance the balloon payment with the existing lender to add more time to the repayment schedule, or the business will apply to another lender to payout the balloon payment and keeping the same equipment as security.
Balloon payments can be a great way to lower monthly debt servicing requirements, but they still need to be addressed at the end of the term. Equipment refinancing can provide a excellent option to 1) retain the equipment, and 2) avoid a cash flow drain by paying the balloon payment directly out of cash flow.
6. Upgrading Equipment
Technology and equipment can become outdated, or the type of equipment needs to be of a larger scale, or some features of the equipment need to be changed out. These are all reasons for upgrading the current equipment so that capital assets are able to better meet the needs of the business moving forward. In many cases, where equipment to be replaced is currently being financed, or has an outstanding balance owing, the existing balance can be transferred to the new equipment being required where both new equipment and any of the old equipment still retained are used for collateral for a new loan.
Lender welcome these types of arrangements, especially in situations where the overall value of their security grows from the equity in existing equipment and the new equipment to be acquired. On the flip side, where trade-ins occur, the equity in the old equipment is used to partially pay for the new equipment with the new loan proceeds paying out the old loan(s) and partially paying for the new equipment.
As long as there is sufficient equity in equipment to work with, there are many different combinations that can looked at from an equipment financing perspective when it comes to upgrading equipment.
Further, in some cases, lenders will reduce or even eliminate prepayment penalties from the original loan agreement in order to secure the new loan and retain the customer.
7. Tax Benefits
Equipment refinancing can also be used to assist with some form of tax planning that would benefit from different payment terms and different loan conditions. This could also relate to estate planning, the sale of a company, and shareholder withdraws that can all have both business and personal income tax impacts that can potentially be lessened from a tax planning strategy that involves equipment refinancing. Just remember to consult with a tax professional to understand the specific impacts based on the business’s financial situation prior to accepting any offer for equipment financing if you are seeking to gain a tax benefit from the process.
Considerations Before Refinancing
While there are many reasons to refinance business equipment, it’s not always the best choice for every business, even if a business has the type of assets to do so. Considerations should include:
Interest Rate versus ROI. The cost of financing is one element. It needs to be compared to the related return on investment or business impact from refinancing. There can be cases where the incremental benefit does not outweigh incremental cost, and in such situations, it may not make sense to refinance.
Short Versus Long Term. If equipment is refinanced, the new loan is still going to need to paid back in the future, so its important that there is a solid plan to repay. In some cases, the refinancing is done to buy time until business cash flow improves which may be hard to predict when that will occur. In those situations, its also good practise to consider building in a buffer into the equipment refinancing process so that any incremental funds required will not overly tax the cash flow in during the required repayment period.
Refinancing equipment can offer numerous benefits to businesses, from reducing interest costs and improving cash flow to streamlining debt management and upgrading essential equipment. However, like any financial decision, it requires careful consideration of the business’s current financial health, future outlook, and the terms of new versus existing loans.
Equipment refinancing is also not offered by very many lenders as it is more of a specialty lending activity. There can also be considerable differences in rates and terms among the companies that do provide equipment refinancing. The process can also take considerable time to complete depending again on the finance company as well as how up to date your financial records are and your current financial and credit status.
So if refinancing is something your considering, make sure to start early so you can work through your options and get things in place when you require them. Also seek out financing expertise that can either point you in the right direction, or assist you with process of locating and securing equipment refinancing facilities.