Ontario equipment refinancing is available on both new and used equipment for many different types of assets and industry classifications.
For new equipment, the equipment refinancing opportunity is when you purchase an asset for cash and then decide after the time of purchase that you would prefer to have financing in place so that some or all of the cash used in the acquisition can be returned to the business cash flow for other purposes.
This is typical in situations where you need to perfect a fast close and don’t have time to get financing in place.
In these situations, most equipment financing sources will consider financing the assets as a new equipment purchase up to 6 months after the initial purchase was completed.
With used equipment, there are basically two Ontario equipment refinancing scenarios that we work with.
First and most common is in situations of growth where the business requires more capital to take on more sales, purchase inventory, acquire more equipment, and so on.
To get equipment financing approved for these types of scenarios at reasonable rates, the business has to show that it is not in any form of financial distress at the time of application nor is it expected to be in distress in the years and months ahead during which time a new loan or lease will be repaid.
And while the going concern business growth scenario can provide reasonable rates in a fairly competitive range, the same cannot be situations where the business is in distress.
When a business is in distress and needs Ontario equipment refinancing to try and survive the short term without a clear path to financial stability after a new loan or lease is put into place, the financing available falls into category of the asset based liquidation lenders.
Because of the higher risk of loss, these lenders will provide lower loan to value ratios and the rates charged can be anywhere from 1.5% to 3% per month on the outstanding balance.
This is what we call short term transnational financing where either the situation is going to improve in the short term, allowing the business to refinance again at a bank or institutional lender at lower rates, or the equipment refinancing secured buys the business time to wind down the business in an orderly fashion, preserving as much equity as possible.
If you are looking for Ontario equipment refinancing options for any of these three scenarios, then I suggest that you give us a call so we can quickly go over your requirements and provide you with refinancing options for your immediate consideration.
Click Here To Speak To An Vendor Equipment Financing Specialist For Your Ontario Equipment Refinancing Needs
If you have used equipment that is free and clear and still has considerable remaining useful life, then we may be able to free up some of the equity you have in the asset with a sale and lease back transaction.
The refinancing of used equipment through a sale and leaseback transaction involves an equipment financing company to purchase your assets from you in return for cash and an equipment lease.
You will repay the cash received over time through your monthly lease payments and at the end of the lease term, you can purchase the assets back for a nominal amount.
Once again, this can only be considered on solid, commodity based assets, with significant useful life available.
Common equipment items that can be refinanced after any initial funding has been repaid would include forklifts, tractors, and different types of heavy machinery.
Typically, an equipment leasing company will only consider this type of financing scenario if the borrower or lessee is financially stable and using the additional capital to fund growth or clean up the balance sheet.
If a business is in financial distress, this can still be an option, but only through asset based lenders that are closely aligned with liquidators in the event that the business fails after a sale and lease back transaction has occurred.
For capital intensive businesses, the ability to finance existing equipment can be an ideal way to increase the available working capital to the business to generate more sales and increase profitability.
In terms of how much capital you can generate from a sale and lease back transaction, a leasing company will typically finance off of a forced liquidation value appraisal, with leverage being around 50% of the liquidation value.
So if you have a piece of equipment that you think is worth $100,000, the forced liquidation value may be $80,000 and the lending or leasing value $40,000.
While this may seem like very conservative financing, this is used equipment and the leasing company wants to make sure that there is sufficient equity in place to cover off their financing risk.
Unlike most equipment financing transactions that can be assessed and funded in a few days, a sale and lease back transaction will typically take a bit longer as a third party appraisal of the assets is likely going to be required by the equipment financing company to properly assess the financing request.
If would like to explore refinancing your used equipment, give us a call and we’ll go through your options with you and get all your questions answered right away.
Click Here To Speak To An Vendor Equipment Financing Specialist For Information On Refinancing Used Equipment