image expired

Add to the above scenario the fact that many banks are more reluctant than in times gone by to release the overdraft ‘purse strings’ and the conclusion drawn is that the autumn and winter months could see an increase in short-term pressure on cash flows which will stretch some contracting businesses.

Asset Refinance / Restructure Finance

Outside the bank or going down the invoice factoring / discounting route; which does not always lend itself well to the contracting sector due to the nature of the customer base, there may be merits in exploring the value of Asset Refinance / Restructure finance as solution to help ease cash flow pressures with the potential to:

1 - Bring additional working capital into the business

2 - Reduce current monthly finance outgoings by extending the term of existing Hire Purchase agreements.

3 – And in some cases, both of the above.

How does it work?

In simple terms this facility aims to raise working capital from equipment & machinery either owned outright by the business or equipment & machinery currently subject to a Hire Purchase agreement, but where equity exists.

The funds are secured via a normal Hire Purchase agreement (typical term 36 months) where the only difference being is that in this scenario, the business is the supplier of the goods as well as the customer.

How long does it take?

From submission of a finance proposal to receipt of funds can be as quick as 5 working days

Important Considerations

Only look to commit equipment that you intend to keep within the business for the majority of the term of the new agreement.

Agreements are normally best written on a Hire Purchase facility as opposed to Finance Lease to ensure:

• that the assets being used stay on the balance sheet of the business
• to avoid any VAT complications
• to avoid any issues regards re-acquiring title of your assets at the end of the agreement.

If in doubt, always involve your accountant in the process before committing.

Summary

Albeit Asset Refinance / Restructure finance usually costs a little more than your straight forward Hire Purchase or Leasing facility, it has potential to be a useful and relatively quick cash flow tool which many contracting businesses may look to take advantage of, especially in a time where many are looking to keep their equipment for that little bit longer.

For Further Assistance & Advice click here