Economic conditions are creating issues for many businesses. Uncertainty, low consumer confidence, and labour shortages can impact the ability of businesses to achieve the required output and turnover to cover costs. Causing pressure on cash flow and pressure on business owners and managers. Finding savings through cutbacks can be a challenge. Where repayments on plant, machinery and equipment are a major monthly outgoing, business owners may consider equipment refinancing as a possible solution.
As experts in commercial funding, Jade Equipment Finance works with individual operators to structure equipment refinancing to meet key objectives. There are a number of reasons why a business may seek to revise their existing loan arrangements, with seeking lower repayments one of the key objectives we address. While our experts handle the process on behalf of clients, it is important that operators understand what is involved to ensure they can make a well-informed decision as to whether to proceed or not.
Key Aspects of Equipment Refinancing
Refinance may sound complex, but the process is essentially straightforward, but with details that do require consideration. Refinance replaces an existing machinery loan with a new loan part-way through a finance term. The new loan encompasses the full amount which is outstanding on the existing loan, including the lender’s exit fees and any other charges, plus applicable charges for establishing the new arrangements.
The new loan may be arranged with the same type of finance as the existing one – Leasing, Chattel Mortgage, Rent-to-Own or CHP, or a change may be preferred. The features of the selected loan type, including tax deductions, residuals, balloons and buybacks, would apply to the new loan arrangement.
The new loan may be sought from the same bank or lender or another lender. We will be working to find the best offer from our large lender market to present for consideration.
An important factor to realise is that the machinery would be assessed as second-hand when applying for refinance. This means, the lender must accept the unit as suitable loan collateral, as the sole security, or additional collateral may need to be provided.
The interest rates relevant to second-hand goods would apply. These may be higher than the rates for new goods. The rate would be based on the current interest rate market with lenders generally setting their rates in line with RBA decisions and the market forecasts.
Some lenders also place special conditions on used machinery loans such as loan and term limits. Lenders assess refinance applications based on the current credit profile and financial documents provided. For operators that have improved their credit rating since the existing loan was established, this may represent an opportunity for a better rate. If the business has grown significantly since the existing loan was established, refinance may present the opportunity for more workable conditions.
We guide operators through the process to source the most acceptable and workable solution. The result of refinance is the existing arrangement is finalised and a new schedule of repayments is established over the term we negotiate with our lender.
Using Equipment Refinancing to Lower Monthly Repayments
Where an operation is seeking to reduce outgoings, targeting a lower monthly repayment through the process of refinance may be a way to achieve that objective. In pursuing that objective, our brokers consider all options – achieving a lower interest rate, extending the finance term, and increasing the balloon.
We contact the existing lender to establish the payout figure – the total amount due to finalise the loan at that time. This will include that lender’s fees and provides the basis for the amount required for the refinanced loan. We speak with our lenders, especially those that specialise in the customer’s industry, to source and negotiate the best offer.
The best offer is presented to the operator for their decision.
Comparing Equipment Refinancing with Alternatives
Comparing refinance with other finance products for easing cash flow pressures can provide operators with a full understanding of their options. Overdrafts and lines of credit are available as finance tools to provide support for cash flow. The interest rates on overdrafts tend to be higher than for asset acquisition loans but may provide a flexible, short-term solution.
We also provide business loans on a secured or unsecured basis, for a range of purposes. Your Jade broker can go through the details of these products to consider whether they present a workable alternative to refinance.
Applying for Equipment Refinancing
As with our process of applying for new asset acquisition funding, applying to refinance is also a streamlined, simple procedure. Operators brief our brokers on their requirements, provide the necessary financial documentation on the business, and we take it from there.
Due to the nature of refinance, an initial phone conversation is preferable so we can get easily get the full picture. If contact by phone is a challenge due to work schedules, our online tools are readily available to connect from anywhere around Australia at any time.
If machinery loan repayments are hampering your operation, speak with us about your options through refinance.
To access expert equipment refinancing services, contact Jade Equipment Finance on 1300 000 003.
DISCLAIMER: IF MISINTERPRETATIONS, MISREPRESENTATION OR ERRORS EXIST IN THIS ARTICLE, NO LIABILITY IS ACCEPTED. THE INFORMATION IS PROVIDED ONLY FOR GENERAL PURPOSES AND NOT IN ANY MANNER INTENDED AS THE ONLY SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADDITIONAL GUIDANCE OR ADVICE SHOULD REFER TO AN INDEPENDENT FINANCIAL ADVISOR.
