Why Refinance Your Asset Backed Lending Facility
Refinancing an existing asset backed lending facility can be a strategic way to strengthen your business finances.
Whether you want to reduce borrowing costs, release additional capital, or secure more flexible terms, refinancing gives you the chance to re-evaluate how your assets are working for you.
If your business already benefits from asset based lending (ABL), you’ll know how valuable it can be for improving cash flow and funding growth.
But as your circumstances change, your existing agreement may no longer be the best fit. Refinancing allows you to take advantage of your current asset values and financial position to create a more efficient and cost-effective facility.
What Is ABL Refinancing?
ABL refinancing involves replacing your existing asset backed lending facility with a new one, either through your current lender or a new provider. The process includes a fresh evaluation of your assets, such as property, machinery, inventory, or accounts receivable, to determine the amount you can borrow.
Once the new facility is approved, the proceeds are used to repay your existing agreement in full. You’ll then continue to make repayments under the new terms, while still retaining ownership and use of your assets throughout the period.
Refinancing can be completed with minimal disruption to your operations, especially when managed by an experienced broker who understands both your business needs and the lender landscape.
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How It Works
The refinancing process follows several key stages to ensure your new facility aligns with your objectives:
Asset appraisal
A lender will first assess the current market value of your business assets. These may include equipment, vehicles, inventory, or outstanding invoices. The stronger and more liquid your assets, the higher the potential borrowing limit.
Identify suitable assets
Ideally, the assets you refinance should be owned outright. However, even if there’s existing finance attached, some lenders may allow refinancing provided it can be cleared using the new facility.
Loan offer and agreement
Once the appraisal is complete, the lender will present new terms and a loan amount based on the value of your assets. Some lenders offer up to 100% of the asset’s market value, though this will depend on the type and condition of the asset, as well as your overall financial standing.
Settlement and repayment
The new facility is used to pay off your previous loan, and you then begin repayments under the new terms. Throughout this period, your business retains use of the secured assets, ensuring continuity of operations.
Choosing the right lender
You may decide to refinance with your existing provider or explore new options for better rates or greater flexibility. Working with a specialist finance broker like Kerr & Watson can save you time, simplify the process, and help you secure the most competitive terms available.
Why Refinance an Existing ABL Facility?
Refinancing can deliver a range of financial and strategic benefits for your business.
Unlock additional capital
As your assets appreciate in value or your business grows, you may be able to unlock more funding than before. This capital can be used to expand operations, invest in new equipment, or support cash flow during busy periods.
Improve loan terms
A change in financial circumstances or an improved credit profile could mean you qualify for lower interest rates or longer repayment terms. Refinancing allows you to take advantage of these opportunities and reduce borrowing costs.
Consolidate multiple facilities
If you currently manage several lending arrangements, refinancing can simplify your finances by consolidating them into one manageable payment. This can make budgeting easier and improve overall financial visibility.
Gain flexibility
A new agreement can offer more adaptable repayment structures, higher credit limits, or facilities tailored to your business’s current needs. This flexibility can help you respond quickly to market changes or new opportunities.
Strengthen lender relationships
Switching to a lender that better understands your sector can create long-term advantages. Brokers like Kerr & Watson maintain strong relationships with a wide range of lenders, enabling you to access options specifically suited to your business model and growth plans.
When Refinancing May Make Sense
Refinancing isn’t just about saving money, it’s about aligning your finance strategy with your business goals. You might consider refinancing your asset backed lending facility if:
- Your existing agreement no longer reflects your current asset values or performance
- You’re seeking improved interest rates or reduced fees
- You’ve recently expanded and need additional funding
- You want to consolidate existing borrowing
- You’re planning a management buy-out, acquisition, or major investment
A professional review of your existing ABL facility can identify whether refinancing will genuinely add value.
Conclusion
Refinancing an existing asset backed lending facility can help your business unlock new opportunities, lower costs, and gain greater financial flexibility.
By reassessing the value of your assets and securing terms that reflect your current position, you can ensure your funding continues to support your long-term goals.
If you’re considering refinancing or want expert guidance on your options, contact Kerr & Watson today.
