The end of each financial year can be an opportune time to assess and review the position of a business and consider the options available to move the business forward to achieve key objectives. The past few years have presented significant challenges, a number of which are ongoing such as outcome from the pandemic and the supply chain issues globally. Amongst the options available to businesses that are reviewing their financial situation is refinancing equipment loans.
As the Australian economy bounces back from the pandemic era, work opportunities in many sectors including construction and infrastructure appear strong while retail, hospitality and tourism enjoy customers returning and spending. But at the same time, inflation is also surging and the RBA is moving on interest rates.
If high overheads especially repayments on equipment finance are hampering the ability of the business to fully realise the situation, business owners can seek our expert assistance for workable solutions.
Refinancing equipment loans can be considered as an effective solution to ease cash flow pressures with rising prices especially around fuel and energy costs. New challenges for business continue to emerge and businesses need to be well-positioned with workable equipment loans to accept the opportunities and overcome the obstacles.
Refinancing may sound like quite a complicated concept which will take a lot of time and attention. In reality, when handled by your Jade Equipment Finance consultant, the process can be extremely simplified, streamlined and deliver effective outcomes.
Objectives of Refinancing
While we have addressed current cost pressures as a key reason to seek refinancing to reduce repayments and outgoings, it can also be an effective solution to achieve other objectives including:-
- Achieve cheaper interest rate equipment finance than the rate on the existing loan.
- Where the business has changed structure, objectives or other operational aspects, a change in the finance product may be called for.
- Where ownership of the business that holds the loan and security or title to the equipment has changed and one owner is taking over the equipment finance from departing directors or partners.
- Where a Bad Credit Equipment Loan was originally secured at a higher interest rate and now that credit profile has been improved and the business is in a position to achieve a lower rate.
- Where the existing equipment finance was arranged with strict conditions which the business seeks to change.
- Where a business seeks to change the bank or finance company which currently holds its loans.
- As part of a broader-based restructuring of the finances.
- Seeking to combine several equipment loans into a single arrangement.
Streamlining the Refinancing Process
The process involves sourcing a completely new finance arrangement to replace the existing loan. The steps to refinance follow similar lines as when seeking the original loan with some variations:-
- Businesses can source refinance directly from a bank or lender or engage experts such as Jade Equipment Finance to handle the process.
- Refinancing can be requested from the same lender as the existing loan or from a different lender.
- Businesses must complete the business finance application.
- A payout figure is requested from the existing lender to assess the amount required to be refinanced.
- A quote is sourced with the loan amount encompassing the total amount outstanding on the current loan including any residual or balloon, interest and the payout costs.
- Payout costs usually apply when a business loan is finalised prior to the end of the finance term. These are typically included in the new loan.
- Jade consultants negotiate with our lenders to structure the refinanced loan to best meet the objectives of the business.
- If the quote meets the approval of the business, we proceed to process the application and finalise the loan.
- Our consultants liaise between the existing and the new lender for a streamlined transfer of the loan.
- If the quote achieved does not leave the business better off, it would not be advised to proceed. However, all decisions are up to our customers.
- The equipment being financed would be regarded as used goods and as such attract the loan conditions and interest rates applicable.
- The full range of different business set-ups can apply for refinancing equipment loans. This includes equipment finance which was originally acquired as a Low Docs or No Docs Equipment Loan or Bad Credit Loan.
Interest Rates and Choice of Loan Type
The refinanced loan may be with the same finance product as the original loan or a change of product may be requested. Businesses can select from Chattel Mortgage, Leasing, Commercial Hire Purchase or Rent to Buy.
The same features and benefits of the finance product would apply including the option for a balloon or residual. Business owners are advised to refer to their accountant when selecting any finance product.
The goods would be treated as used and this may impact the interest rate and loan conditions including the lender accepting the equipment as suitable security against the loan.
Refinancing existing assets would not meet the eligibility criteria for IAWO and temporary full expensing as these measures relate to new assets to the business.
The interest rate offered is established primarily based on the credit profile of the business.
With the start of the new financial year just weeks away and further interest rate increases imminent, businesses are urged to move on refinancing plans in order to achieve better, pre-rise interest rates.
To discuss refinancing equipment loan solutions for your business 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.
