In the ever-evolving construction industry, maintaining a healthy cash flow is as crucial to your operation as laying the correct foundation. Without your cash flow in good shape, you may be unable to take advantage of timely commercial opportunities. With rising materials costs, the industry has had to challenge previously successful traditions and change the way they operate. One way construction firms have evolved, is they are seeking smarter ways to fund growth. A particular solution that’s recently gaining traction is Asset Refinance. Put simply, this means construction firms are unlocking cash tied up in their significant assets in order to remain as agile as possible.
What is Asset Refinance?
Asset refinance allows you to unlock the value tied up in your business’ tangible assets – such as vehicles, machinery, or equipment. You use these assets as security for a new finance solution. Your business borrows against the value of an existing significant asset(s) on your balance sheet, transferring ownership of the asset to the lender for the duration of the finance, in exchange for a lump sum of capital which is then repaid over an agreed term. Once you make your final payment, you restore ownership of the asset.
Asset refinance is particularly suited to asset-heavy industries, where tangible assets represent a significant portion of your company’s value.
Why Construction Firms are benefitting from Asset Refinance right now
Construction firms often face a number of issues that result in possible cash flow gaps. They experience periods of low demand (particularly in Britain because of the weather), delayed payments from developers due to the long-term paybacks in property, and an ever-rising cost of materials and labour. Asset refinance helps to bridge these gaps so that construction firms can continue to service their contracts and flourish. Construction firms are benefiting from:
- Improved cash flow without selling off assets
- Funding new projects and bids for growth
- Potential to consolidate any commercial debt into single, manageable payments
- Purchase additional equipment without waiting for capital to build-up
- Bridging the gap between delayed client payments terms and their business costs
Type of assets construction firms refinance
- Excavators, bulldozers and dump trucks
- Scaffolding systems and access platforms
- Cranes and similar lifting equipment
- Vans and HGVs
- Concrete mixers and pumping equipment
These assets can be owned outright, or have existing finance. Lenders may work with the latter depending on the asset and your unique circumstances.
Mill Wood Case Study
A Midlands based construction firm owned a large fleet of heavy machinery and vehicles valued at £1,125,000 with no outstanding finance. Rather than take on unsecured debt which may be more costly, the owner of the business instead refinanced a portion of their heavy machinery to release £250,000 for working capital. This extra capital allowed the firm to win two new large bids, and they were able to begin the projects immediately using these funds. Crucially, the client maintained ownership of their heavy machinery – and could use it as normal throughout the length of the agreement.
Is Asset-Refinance Right For Your Construction Business?
If your construction firm owns valuable assets that you would like to maintain ownership of, asset refinance can represent a sensible solution to help you release funds from these significant tangible assets. Asset refinance is flexible, and often faster than traditional borrowing. However, the suitability depends on your businesses unique aspirations, whether you have any current finance obligations, and crucially – the value of your existing assets.
The Mill Wood Approach
At Mill Wood, we take pride in our process and our intimate relationships with a range of lenders and finance houses. It is our role to be as flexible as possible to help you find the most suitable refinance to allow your business to flourish.
We work with businesses of all sizes across the UK to structure asset refinance solutions, tailored to your unique requirements. Whether you’re looking to release cash from a single asset or refinance a number of assets, we can help you access the funding your business needs.
Interested in exploring the finance options available for your business? Get in touch with our team for a free consultation call.
