Equipment Refinancing May Be A Great Way To Raise Working Capital

equipment refinancing

Equipment refinancing may be a viable way to raise working capital or increase cash flow if you are already in a capital-intensive business. Many businesses have large amounts of capital tied up in specialized equipment. The equity in this equipment can range from a few thousand to many millions of dollars. Refinancing this equipment with a reputable funding source can be a wise decision. The refinancing transaction usually works in one of two ways. The first way is to have the funding source pay off your original loan and offer you a new loan with lower interest and lower payments. The second way is, the funding source purchases your equipment and leases it back to you in a sales/leaseback agreement. Refinance Your equipment now.

What Are Some Businesses Best Suited For Refinancing Equipment?

The best business suited for refinancing are businesses with large amounts of equity tied up in the equipment. Some primary candidates are medical facilities with expensive diagnostic equipment, dentist offices, automotive repair shops, machine shops, small & mid-size manufacturers and excavating and paving contractors. If you are in one of these businesses or a similar business, refinancing your equipment may benefit you in several ways. You can often get a lower monthly payment and/or cash out the equity in your equipment. This situation could improve your monthly cash flow and give you additional working capital at the same time. You could use the working capital to expand your current business, buyout a partner or purchase the real estate that you business occupies.

Some Restrictions On Equipment Refinancing and Sales/Leaseback

The age and condition of the equipment that you want to refinance is a primary factor in the amount of money you will be able to receive. Some lenders will have an age limit on certain types of equipment from 6 months to 5 years. This is understandable because the equipment is collateral for the loan or lease. The equipment is some businesses such as paving or some manufacturing may only have a useful life of 5 years or less, due to the severity of the work environment. The resale value of other equipment, such as IT hardware and medical diagnostic equipment, may be limited by impending obsolesce.

You credit rating will impact the kind of deal that you will be able to acquire also. A minimum score of 650 - 680 will be required for most businesses. Owners of restaurants and some other businesses with high failure rates will need a score of at least 700.

You will have to shop for the equipment funding deal that makes the best economic sense for you as you would with any other business funding. Begin the refinancing process here.

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