Asset refinance has various uses, depending on the context it is required for:
- Used as a security for a loan
- Combined with other finance methods
- Refinancing business debt i.e debt consolidation
For the context of Company Rescue, we are focusing mainly on debt consolidation…
When businesses fall into trouble, debt can amount. The concept of refinancing business debt, means consolidating all of the debts into one, or changing one loan for another i.e swapping an expensive debt for a more affordable one. This allows breathing space for the struggling business.
It is essential that you chose the most suitable terms and rates provided by the chosen facilities, so the least risk is taken on.
The three benefits…
1. Savings from the lower rate of interest charged, or the smaller monthly repayments. You may chose to spread the same loan amount over a longer period of time, to reduce the size of individual repayment so each month the debt effect is less detrimental.
2. Simplicity from having one set of payments to your concern, rather than many. This allows single contact points rather than having to contact several lenders. Daily runnings of the business can be focused on instead.
3. Safety from greater working capital being available.
Security for a loan
This is the use of assets (valuable business owned items) to secure a loan. If you cannot repay the business, lenders have every right to sell the asset to get their money back. Unsecured business loans also exist, these just having no particular asset attached – it is more risky as a more flexible decision arises for the lender, regarding what company asset to take.