Refinancing in the building and construction industry
It’s common for those working in building and construction to have a large amount of equity tied up in vehicles and equipment. Refinancing provides a quick and effective way for businesses to release capital from these assets – and there are other benefits too!
By refinancing, construction companies can take advantage of lower interest rates, lower monthly payments, and shorten their loan repayment terms.
This allows them to free up cash flow, reduce debt, and increase profitability.
In this article, we explain what refinancing is and how the construction industry can take advantage of it as a powerful source of funds for projects, expansion, maintenance and more.
What is refinancing?
Refinancing is the process of obtaining a new loan against an existing asset that is used as collateral. In the context of the construction industry, refinancing is typically used to release the equity tied up in machinery, vehicles, and other equipment that a business owns.
By refinancing these assets, businesses can access funds quickly and efficiently, without needing to sell their equipment outright.
How can refinancing benefit the building and construction industry?
Refinancing can provide a financial boost for any construction company looking to invest in new projects or improve existing operations. However, many businesses in the industry may not have the necessary cash reserves to finance these ventures upfront, which is where refinancing can be a useful tool.
By refinancing their equipment and machinery, businesses can release equity to access the funds they need without having to disrupt their operations or take on additional debt that could impact their credit rating.
By refinancing, construction companies can also convert an adjustable interest rate to a fixed interest rate or take advantage of lower interest rates, lower monthly payments or shorten their repayment terms.
This allows them to free up cash flow, reduce debt, and focus on meeting client demands without any financial limitations holding them back.
What building and construction equipment can be refinanced?
Refinancing is available for vehicles, plant and machinery, whether currently on finance or not. This includes equipment such as excavators, bulldozers, loaders, dump trucks, cranes, and more.
In fact, most lenders will release up to 80% of the current equipment value into your business as working capital, allowing you to continue using the equipment as usual while using the capital to fund your projects or growth plans.
What are the different types of building and construction equipment refinancing?
Equipment refinancing is a financial solution that allows businesses to release equity or to adjust their repayment terms. This process can be conducted through various equipment refinancing methods, including rate and term refinancing, consolidation refinance, and cash-out or cash-in refinancing.
Rate and term refinancing is where the original loan is paid off and replaced with a new loan with lower interest payments.
Consolidation refinance is a strategy used to combine multiple existing debts into a single, more manageable payment on a lower interest rate.
Cash-out refinancing offers businesses the option to refinance their equipment at a lower rate and take out additional cash that can be used for business expenses or investments. This is often used when assets have increased in value over time.
Cash-in refinancing lets the borrower make a payment towards their loan, resulting in a lower loan-to-value ratio or simply smaller monthly loan repayments.
What is the criteria for refinancing building and construction equipment?
The minimum amount you can refinance is £10,000.
You can refinance equipment that you already own and continue to use the equipment. Our lenders will have criteria regarding the age and condition of the equipment but there is no specific age limit to the equipment and vehicles that we can refinance.
You can also refinance equipment and vehicles if they’re already on finance, provided enough equity is available.
All equipment or vehicles must be based in the UK.
How Origin Finance can help
Refinancing can be a solution for contractors, sub-contractors, and those working in the construction industry who are looking to release equity tied up in machinery, vehicles, and other equipment, businesses can access working capital quickly and efficiently.
As experts in construction finance, we can save you valuable time by doing the heavy lifting in researching and connecting you with lenders, ensuring a smooth and time-efficient process.
We’ll guide you through the complex loan application process, using our experience to present your information in a favourable light to lenders.
We also have access to a wide range of lenders, with up to 50% of UK commercial lenders only accepting applications from brokers. This access can be vital if you’re looking to reduce your current interest rate.
Crucially, we’ll help to safeguard your credit rating by ensuring you apply only to the most suitable lenders, reducing the need for multiple hard credit checks.
Refinancing in the building and construction industry
If you are interested in exploring refinancing options, reach out to our team of experts who can provide a free no-obligation quote without affecting your credit score.
