The murky world of refinancing – how can I simplify this process?

While many businesses do not relish the prospect of raising further finance against their assets, the reality is that for a business to continue to operate successfully it needs access to working capital to effectively oil the wheels of its operation.

And it is not just small firms who have had to look at refinancing options amidst a subdued economy. Acromas, owner of AA and Saga, is set to announce a £3bn refinancing deal that will create a package of longer-term, cheaper debt to replace existing high-interest loans.

Last month Italian car manufacturer Fiat also began talks to refinance an existing €1.95bn loan.

There are a number of refinancing options available to businesses who are struggling to stay afloat under volatile market conditions.

Simplifying this process is a matter at examining all the refinancing options available to you and looking at which best suits the needs of your business.

Bank overdrafts

Probably the simplest way to for businesses to get a quick boost to their finances is to talk to their bank about increasing their overdraft limit. This means that businesses will have a financial buffer in place to draw on when needed.

This option is suitable for any business that does not want to enter into a long-term financial agreement which is secured against their assets. However, it is important to note that a lender has the right to call in your outstanding overdraft balance at any time.

Asset refinancing

Asset refinancing essentially allows a business to release funds that would have otherwise been locked into their balance sheets.

Asset refinance allows business to agree finance based on a value of their assets – such as equipment and machinery – which can then be used to inject some much-needed cash flow into the business.

The asset refinance agreement is then paid back at weekly, monthly or quarterly intervals, often at a fixed rate of interest.

This option could be suitable for a range of companies, but particularly those who are asset-rich and looking for flexible loan repayment period.

Factoring and invoice discounting

Both factoring and invoice discounting allow businesses to raise capital against any outstanding balances from debtors. This type of refinancing is particularly useful for businesses that have payments from customers in the pipeline, but need immediate access to this balance.

The key difference between factoring and invoice discounting is that the former normally takes responsibility for your sales ledger.

If your business needs further support to get back on track you may want to seek professional advice on your restructuring options.

If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1143.