Despite the RBA repeatedly stating it was prepared to patient over the last year and fending off comments for the Board to act and raise rates, the time does finally seem to have just about arrived. The time for the current historic low interest rates to be consigned to history once more. The RBA is expected to increase the cash rate, possibly several times over the course of the rest of this year, starting possibly as soon as June. With the prospect of higher lending rates ahead, many businesses are focussing on refinancing equipment and business loans to ease cash flow while rates are low.
The economic conditions are in the target zone for the RBA to act with the March unemployment figures coming in at 4%, steady with the February rate. But inflation is continuing to increase. These are the conditions that the RBA had suggested would trigger a rise.
To take that final advantage of the current historic low rates, business may consider refinancing a range of existing loans. For those that have not previously refinanced, there may be a range of doubts and queries around what it involves, if your business and the equipment is eligible and if refinancing can be arranged within a short timeframe. As specialist business lenders, we are extremely experienced in sourcing and structuring cost-effective refinance for a range of loan types. We provide clarification of a number of issues around refinancing to assist business owners.
What Refinancing Involves
It may sound complex but the process of refinancing can be a straightforward as sourcing and applying for the current loan arrangement with a few additional considerations.
- It involves sourcing a new loan to replace the current loan.
- A loan application is completed and our Jade Finance consultants source the most suitable cheapest finance quote.
- Subject to lender requirements, the refinanced loan amount can envelope the full amount outstanding on the current loan – the repayments and any residual or balloon as applicable.
- All business types including sole traders and SMEs are eligible to apply for refinancing.
- A wide range of business loans can be refinanced including:- motor vehicle finance, truck loans, equipment finance, business overdrafts and secured and unsecured business loans.
- Refinancing can be sought through the same lender that holds the current loan or through a different lender. There is no commitment to refinance with the existing lender. As we are accredited with many banks and non-bank lenders, we offer customers a vast choice in regard to lenders.
Selecting Loan Type for Refinancing
The same finance product which was used for the current loan does not have to also be selected for the refinanced loan. For finance on assets such as motor vehicles, trucks and equipment, businesses can decide between Chattel Mortgage, Lease, Rent to Own and Hire Purchase. The decision will depend on which offers the greatest benefit to and suits the individual objectives of the business.
Securing cheaper interest rate finance is a key reason for change or refinancing and particularly in the current interest rate scenario. Chattel Mortgage and Hire Purchase attract a lower rate than Lease and Rent to Own.
Changing the finance product through refinancing may be a practical way to achieve that lower rate.
The interest rate offered on a refinanced loan will be based on the rates at the time the loan is quoted. That means the current rate. Depending when the current loan was established, that could represent a considerable reduction.
The rate offered on refinancing will be also arrived at based on the specifics and credit profile of the applicant. If a business has for example significantly improved a credit score since the time they applied for the current loan, the interest rate offered on refinancing may be significantly better.
Estimating Refinance Repayments
Securing a lower figure in monthly loan repayments can be a common reason to pursue refinancing. Cash flow pressures are impacting many businesses and that may be eased through lowering recurring outgoings such as finance repayments.
Our consultants work with our customers and lenders to negotiate on suitable loan terms and rates to achieve the target finance repayment amount.
Use our calculators to receive estimates on what may be achieved. Being mindful that the charges to pay out the current loan early and establish the new finance need to be allowed for.
Be Mindful Of…..
Refinancing can be a strategic move to ease cash flow, secure lower interest rate finance or to restructure finance to better suit the business. But the process should be considered in context and being mindful of:-
- Charges by the lender for finalising the current loan early plus the new loan fees.
- Temporary full expensing would not apply to refinanced goods as that measure relates to new not existing assets.
- The assets being refinanced, despite originally being acquired ‘new’ would now be considered by lenders as ‘used’. In some cases, the interest rate on second hand goods may be higher than for new.
With Jade Finance handling your refinancing request, the process can be dealt with promptly, smoothly and with minimal time and effort on your behalf and deliver considerable benefits to your business.
Contact Jade Finance 1300 000 008 to discuss refinancing existing business loans.
DISCLAIMER: NO LIABILITY IS ACCEPTED IF ERRORS OR MISREPRESENTATIONS ARE FOUND IN THIS ARTICLE. THE ARTICLE IS PREPARED AND PRESENTED FOR GENERAL INFORMATIVE PURPOSES AND IS NOT INTENDED TO BE THE SOLE SOURCE OF INFORMATION FOR MAKING FINANCIAL DECISIONS. THOSE REQUIRING GUIDANCE AND ADVICE SHOULD CONSULT A FINANCIAL ADVISOR.