Business finance
Refinancing equipment you already own to free up cash
William Krypuy
What equipment refinance actually is
Equipment refinance releases cash against plant and vehicles the business already owns. The financier advances funds and registers a security interest over the asset. You keep the asset and keep using it, and you repay the advance over an agreed term. Nothing about the day-to-day operation of the machine changes.
Why business owners reach for it
Sale and leaseback, and how it differs
Sale and leaseback is the other route. Instead of lending against the asset and leaving title with the business, the financier buys the asset at an agreed value, pays the funds across, and leases it back to you. You keep possession and use. Ownership sits with the financier for the term.
Refinance against the asset
What a lender will lend against
Not every asset refinances. Lenders sort equipment by how easily it could be sold again if it had to be, and that sorting drives everything else: how much they will advance, over what term, and on what conditions.
| Asset type | How lenders see it | What that means in practice |
|---|---|---|
| Trucks, trailers, prime movers | Serial-numbered, strong resale market, easy to identify on the register | Usually the most straightforward to refinance, including at greater ages |
| Earthmoving and construction plant | Well traded, values published in industry guides, hours matter as much as age | Refinanced readily where hours are reasonable and service records exist |
| Manufacturing and CNC machinery | A thinner and more specialised resale market | A more conservative advance, and a physical valuation is more likely to be required |
| Fit-out, shelving, soft assets | Little standalone value once installed | Rarely refinanced on their own; usually need other security alongside |
| Assets under an existing contract | Already encumbered to another financier | A payout figure is obtained first, and the deal becomes a refinance of that balance plus any equity above it |
The register search that stops deals
Before it advances a dollar, the financier searches the Personal Property Securities Register against the business, against the directors, and for serial-numbered goods against the VIN or serial number. It is looking for registrations that would rank ahead of it.
- PPSR
- Security interest
- Retention of title
- All present and after-acquired property
- Discharge
What a stale registration does to the calendar
Day one, morning
You search the register yourself, against the company, against the directors, and against each serial number or VIN. It costs a few dollars.
Day one, afternoon
Anything stale goes straight back to the financier that registered it, with a written discharge request. Nothing else on the file can start that conversation for you.
Day two to ten
The former financier finds the file and removes the registration. That stretch of the calendar belongs to them, and no amount of urgency at your end shortens it.
Same fortnight
Valuation, financials and the payout figure on any asset still under contract all run alongside, because none of them depend on the discharge.
Settlement
The incoming financier registers its own interest and advances the funds. A clean register is what it was waiting for the whole time.
The other version
The search is left to the lender, the same stale registration surfaces in week two, and the file then waits on a phone call that could have been made on the first morning.
General process. How long a discharge takes depends entirely on the former financier.
View as a table
| When | What happens |
|---|---|
| Day one, morning | You search the register yourself, against the company, against the directors, and against each serial number or VIN. It costs a few dollars. |
| Day one, afternoon | Anything stale goes straight back to the financier that registered it, with a written discharge request. Nothing else on the file can start that conversation for you. |
| Day two to ten | The former financier finds the file and removes the registration. That stretch of the calendar belongs to them, and no amount of urgency at your end shortens it. |
| Same fortnight | Valuation, financials and the payout figure on any asset still under contract all run alongside, because none of them depend on the discharge. |
| Settlement | The incoming financier registers its own interest and advances the funds. A clean register is what it was waiting for the whole time. |
| The other version | The search is left to the lender, the same stale registration surfaces in week two, and the file then waits on a phone call that could have been made on the first morning. |
The structures, compared
| Structure | Who holds title | At the end of the term |
|---|---|---|
| Chattel mortgage | The business owns the asset from the outset; the financier registers a security interest | The loan is repaid and the security interest discharged; a balloon may be payable |
| Finance lease | The financier owns the asset and leases it to the business | The residual is paid, refinanced, or the asset is returned |
| Sale and leaseback | The financier buys the asset from the business, then leases it back | As with a finance lease: residual, refinance or return |
| Operating rental | The financier owns the asset and carries more of the residual risk | The asset is handed back or a fresh agreement is written |
Balloons and residuals deserve a sentence of their own. A larger balloon lowers the monthly repayment and raises the amount due at the end. That is a cash flow decision, and it should be made with the asset's expected life and likely resale value in front of you, not on the strength of the monthly figure alone.
Running the numbers honestly
Releasing cash against an asset is only sensible where the cash does more for the business than the finance costs it. Work it in this order.
- 01
Name the use of funds
A working capital gap, a tax balance, a supplier who has gone to stop-supply, a deposit on a signed contract. If you cannot name it in a sentence, do not raise it.
- 02
Total the existing commitments
Every finance contract on every asset, with the balance, the term remaining and the residual. Business owners are routinely surprised by their own total.
- 03
Test the servicing against a bad month
Add the new repayment to the existing ones and run it against the quietest month of last year, not against the average month.
- 04
Match the term to the asset
Do not finance a machine over a term longer than you intend to keep it, and do not answer a permanent shortfall with a facility that ends in three years.
- 05
Decide the exit before you sign
Know what happens at the end: residual paid, asset sold, or facility refinanced. That decision is cheaper made now than in the final quarter of the term.
The same hundred thousand, arriving in a different shape
Illustrative projection only. Not a quote and not an offer of credit.
View as a table
| Amount | |
|---|---|
| Activity statement balance | $60,000 |
| Supplier account on stop-supply | $22,000 |
| Contingency for the quiet months | $18,000 |
| Three obligations, three deadlines | $100,000 |
| One facility across two owned machines | $100,000 |
When equipment refinance is the wrong answer
Equipment refinance solves a timing problem. It does not solve a margin problem. Where a business is losing money on every job, releasing equity from the plant funds the losses for a few more months and leaves the business with the same problem plus a new repayment.
