Asset refinance
You can secure a loan with e.g. commercial property, equipment or vehicles. The amount will depend on the type of the asset, its condition, age and the percentage you own.
What is asset refinance?
Equity in asset
Asset refinancing is essentially allowing lenders to look at the equity (share) you currently have in an asset and based on that evaluation you will receive a loan. For example, if you purchased equipment on a hire purchase agreement and have some money left to pay (to the hire purchase provider), you can still raise finance against this (partially owned) asset. The new lender will usually pay off your original lender (in this case the hire purchase company) and give you a lump sum based on the equity you have in the asset.
Don’t need to own the asset
One advantage of refinancing is that you don’t need to own the asset(s) outright, because lenders will base their offer on the equity you currently hold. Refinancing is always limited by the value of the asset(s) on offer — you couldn’t borrow £10,000 secured against an asset worth £5,000 — but with enough equity in an expensive item, you could still unlock a sufficient amount of cash for your requirements.
Raise finance
That means that if you’ve equipment through hire purchase, for example, you could raise finance against it even with money still to pay off to the hire purchase provider.
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How does asset refinance work?
Quick example
Let's take a quick example to show how asset refinance works in practice. Joe’s construction firm has a machine worth £10,000. He got it on a hire purchase agreement, and only has £1,000 left to pay.
Part ownership
That means he has £9,000 of equity in the item — or to put it another way, Joe’s company owns nine-tenths of the machine, and the hire purchase provider owns the other ten percent.
Refinance lender
In this situation, provided it’s the right kind of machine, Joe could refinance it up to the value of about £6,000 (so 70% of the item’s overall value) — the refinance lender would pay the hire purchase firm the remaining value of £1,000, take the charge over the asset, and lend Joe £6,000 based on its value.
How much can you afford to borrow?
If you're ready to take your business to the next level, use our business loans calculator to get an idea of what you can afford.
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Calculations are indicative only and intended as a guide only. The figures calculated are not a statement of the actual repayments that will be charged on any actual loan and do not constitute a loan offer.
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Total interest
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Financial product information
Representative example*
• 7.63% APR Representative based on a loan of £50,000 repayable over 24 months.
• Monthly repayment of £2,252.94. The total amount payable is £54,070.56
*Some lenders may apply fees during the application process, please note that these are set and provided by these entities.
Annual Percentage Rates
Rates from 2.75% APR
Repayment period
1 month to 30 years terms
Equity is key to refinancing
Arrangement
In the above example, this arrangement would work in a similar way if Joe owned the asset outright, but in that scenario, he’d probably be able to raise more money against it.
90% equity
In the first example, Joe effectively owns an asset worth £9,000 because he has 90% equity of £10,000; in the second case, he owns 100% of it, so his equity is worth the full £10,000.
Commercial property
You can apply the same logic to any asset that a lender will accept as security — for example, if Joe owned a commercial property worth £500,000 and had £200,000 of a commercial mortgage left to pay off, he effectively owns an asset worth £300,000 and might be able to refinance and get a loan based on that value.
Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.
It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.
Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.
