Refinancing Machines
In today’s competitive landscape, staying ahead requires constant innovation and efficiency. For many businesses, particularly those reliant on machinery, this often translates to acquiring the latest equipment. Machinery loans offer a powerful tool to achieve this. However, a potentially overlooked opportunity exists which is Refinancing Machines.
Leverage Your Existing Machines
Refinancing machinery is a financial strategy that allows businesses to leverage their existing equipment to improve their cash flow and business operations. It can be defined in two perspectives.
- One, where there is no loan on the machine – in this case, the machine itself will stand as the collateral and the funding can be arranged against it.
- The second one – is in a condition where the machine is mortgaged with any other financial institution with unfavourable terms or low exposure. In this case, the funding can be arranged by taking over the loan from the existing lender and adding extra exposure. Here the loan-to-value ratio may vary.
This can translate to lower interest rates, extended repayment schedules, or even securing additional funds for unexpected upgrades.
Learn how Machinery Loans help in Business Growth.
Benefits of Refinancing Machines:
1. Reduced Costs
Introducing the new lender by taking over the existing machine will always help in term of reducing the cost. Cost in terms of interest rate, some bullet payments, increased tenure etc.
2. Lower interest rates
Lower interest rates free up significant capital that can be redirected towards growth initiatives like marketing, hiring, or expanding your product line.
3. Improved Cash Flow Management:
Generally, the tenure of a machine loan will be around 36 to 60 months. However, wherever we replace the existing lender, we can get an extension in the repayment tenure. So higher the tenure, the lower the cash outflow. And lower the cash flow for EMI (interest + Principal ), the higher the support to working capital.
4. Unlocking Additional Capital:
In some cases, refinancing can allow you to access additional funds for minor upgrades or maintenance on your existing machinery, maximizing its lifespan and productivity.
5. Enhanced Financial Flexibility:
Whenever the promoters of the company /firm take up the new machine, the machine will have its own capacity to absorb the raw material. So when there is new/additional machinery you always should have the additional working capital. Then only the machine can be used at its capacity. Mortgaging the machine and getting the funds against it will always help to maintain a good financial position.
Boost Financial Health with Refinancing Machines
For manufacturers and industrial businesses, machinery is a fundamental asset for production. However, financing this equipment can create long-term debt obligations. Machinery refinancing offers a strategic approach to managing this debt and unlocking potential financial benefits.
Imagine a scenario where a company secures a machinery loan at a specific interest rate. Over time, market conditions may change, leading to lower prevailing interest rates. Refinancing allows the company to replace their existing loan with a new one from a different lender, ideally offering a lower interest rate and potentially more favourable terms. This can significantly impact a company’s financial health.
Before You Refinance:
1. Loan Terms:
Carefully analyse the new loan’s interest rate, repayment schedule, and any potential fees. Ensure the long-term benefits outweigh the short-term costs of refinancing.
2. Market Rates:
Shop around and compare offers from multiple lenders to secure the most competitive rates.
3. Prepayment Penalties:
Some existing loans may have prepayment penalties. Factor this into your calculations to determine if refinancing is truly advantageous.
Banks and lenders check your CIBIL score before sanctioning your loan.
Conclusion:
By strategically leveraging machine refinancing, businesses can unlock the hidden potential within their existing equipment. The additional capital and improved cash flow can fuel growth initiatives, enhance efficiency, and ultimately propel your business forward.
We provide invaluable guidance throughout the refinancing process. So, don’t let your existing machinery loan hold you back. Explore machinery loan and refinancing options with Terkar Capital and unleash the full growth potential of your equipment!
