If you have equipment that does not have any liens registered against it, or has sufficient equity to support paying out the existing loan or lease and providing additional the additional capital your business requires, then it can be possible to arrange equipment refinancing, or a sale and lease back transaction, provided that you can meet all the lender or leasing company requirements.
The first thing that is going to be important is the type of equipment, its condition, and the current assessment of value by the equipment financing source.
The more the equipment represents what we call commodity assets with significant remaining useful life, the better the chances are of getting the equipment refinanced.
The security and lending value attached to the equipment will typically be done under a forced liquidation appraisal, providing a very conservative value of what the equipment would be worth if sold at auction.
A financing company willing to consider an equipment refinancing request, tends to consider a financing amounts at no greater than 60% of the forced liquidation appraised value.
Most equipment refinancing scenarios are required to inject more working capital into the business.
If the business is on solid footing or in the process of getting back on track, then there is a good chance that equipment refinancing can be available.
However, if the business is already in financial distress and its hard to tell if the incremental capital that a potential equipment refinancing will provide will stabilize the financial position, then only the higher priced liquidation lenders are going to be interested in the deal.
Each equipment financing source that will entertain these types of deals will have their own minimum and maximum lending amounts that they will consider.
In general terms, the minimum request for funding needs to be at least $100,000 with some minimum funding amounts of $250,000 or higher.
Smaller amounts are harder to get someone interested in due to the amount of work required to qualify the deal and get funding in place.
If you’d like to discuss an equipment refinancing scenario, please give us a call and we’ll get all your questions answered right away.