Asset refinance: releasing equity from equipment you already own

If your business owns vehicles, machinery or equipment outright, or with only a small amount of finance left on it, that equipment can be a source of working capital you have not yet tapped. Asset refinance releases cash against assets you already hold, rather than funding a new purchase.

Summary

• Asset refinance releases cash against equipment, vehicles or machinery your business already owns, using the asset as security for a new facility.
• The amount available depends on the asset's current value, its age and condition, and any existing finance against it.
• It can be a faster, lower-cost route to working capital than unsecured borrowing, because the asset reduces the lender's risk.
• The asset can be repossessed if repayments are not kept up, so only refinance equipment you can afford to risk.

How asset refinance works

You own, or substantially own, a qualifying asset. A lender values it, typically through an independent valuation or a desktop assessment for more standard equipment, and agrees to advance a percentage of that value as a lump sum, secured against the asset, much like a hire purchase agreement in reverse. You then repay the advance over an agreed term, and the lender holds a charge or interest in the asset until it is repaid.

What qualifies

Vehicles, from vans and HGVs to specialist commercial vehicles, are commonly refinanced, as are plant and construction machinery, manufacturing and production equipment, and sometimes other business-critical assets with a clear resale market. Lenders generally prefer assets that are not highly specialised, since a more generic asset is easier to value and resell if things go wrong, and that still have useful working life left, since lending against an asset close to the end of its life is harder to justify.

How much you can release

The amount available is based on the asset's current market value, not what you originally paid for it, assessed by an independent valuer or using recognised trade guides for more standard equipment. If there is existing finance against the asset, that balance is typically settled from the new facility, with the remaining equity available to you as cash. A business with a £100,000 piece of machinery, fully owned, might be offered a percentage of that current value, depending on the asset type, its age and the lender's appetite.

Why businesses use it

Common reasons include releasing cash for working capital without taking on a new unsecured facility, spreading the cost of a large asset purchase retrospectively, consolidating smaller, more expensive facilities into one, and funding growth, such as hiring or stock, using equity already sitting in the balance sheet. Because the asset itself provides security, pricing is often more competitive than unsecured lending, and approval can be quicker where the asset is straightforward to value.

What lenders check

Beyond the asset valuation, lenders look at ownership, confirming the asset is free of other claims or that any existing finance can be cleanly settled, the business's trading history and bank statements, much as with other lending, and the condition and remaining useful life of the asset, sometimes requiring an inspection for higher-value machinery or vehicles.

Risks to weigh up

The central risk is straightforward: the asset secures the facility, so if repayments are not maintained, the lender can ultimately repossess it. For a business, that might mean losing a vehicle or a piece of machinery that is central to day-to-day operations, which is a different kind of risk from an unsecured loan. Only refinance equipment the business could genuinely operate without, or replace, if the worst happened, and be realistic about the repayment commitment before signing.

How it compares to other options

If you need cash quickly and do not want to put an asset at risk, an unsecured business loan or revenue-based finance may suit better, albeit usually at a higher cost. If you have significant equity tied up in equipment and want a lower-cost route to working capital, asset refinance is often more competitive. Our guide to asset finance covers the purchase side of this market in more detail.

Preparing to apply

Have details of the asset ready, including make, model, age, hours or mileage where relevant, and any finance currently secured against it, along with recent bank statements and accounts, as for most business lending.

Getting an indicative valuation

Lending Box can point you towards lenders on our panel who specialise in asset refinance for your type of equipment and give an early indication of likely release value. As a broker we are paid by the lender, not a lender ourselves, and figures given are indicative only, subject to valuation and lender approval.