Sale & Leaseback
Refinancing is the process by which a business can use their existing assets to release equity and raise additional capital for a number of purposes, these assets are usually but not always unencumbered (free from finance). By releasing capital tied up in your fleet or other fixed assets we can help improve cash flow and stability for a business. Funds can be used to recover from bad debt, clear any CVA and HMRC arrears, reduce bank overdrafts or consolidate other debts. Also the injection of working capital can fund expansion of the business or to fund management buy ins/outs. Refinance agreements are often referred to as a “Sale and Leaseback” or a “Sale and Hire Purchase Back”.
While every funding project will be different, there are some simple guidelines:
- Loan purpose: Business-critical assets only (Tractor Units, Trailers, Road Tankers, Industrial Plant & Machinery)
- Loan amount: Up to £25,000 -£5M plus per transaction
- Loan term: From 6 months, up to 7 years (84 months)
- Loan details: Fixed rates and repayments based on secured lending only
- Loan to Value (LTV): New assets (within 90 days) – up to 90% LTV of the invoice price / market valuation. Used assets – up to 80% LTV of the invoice price / market valuation
- Used asset age: Up to 12-15 years old at end of term, depending upon the type of asset and underlying project
Chattel Mortgage
A chattel mortgage assigns security over an asset for a loan facility registered at Companies House. Refinancing under this method helps improve working capital and releases equity tied up in the fixed asset. The asset will be recorded on your balance sheet, allowing you to claim any available writing down allowances and offset the interest element of the repayments against your tax charge. These transactions can be arranged very quickly. The first step in a refinance transaction is to bring together all essential information about the assets to refinance such as mileage, locations, exact model and general condition. From here the finance company will place a valuation on the assets, take title of the assets and then advance funds to you. Once the mortgage has been repaid, the charge is released and clear unencumbered title passes back to you.
If you wish to have an exploratory chat to find out how we could structure a potential Refinance & Equity Release transaction that would make a difference to your business, please get in touch at enquiries@advanceleasing.co.uk
