Refinancing an equipment loan: when it is worth it
The finance you signed two years ago may not be the best deal today. Rates move, your business gets stronger, and sometimes you just need to free up cash. Refinancing an existing equipment loan can help with all three, but only if the numbers actually stack up.
This guide covers when refinancing is worth it, when it is not, and the trade-offs to check first. General information from the broker's chair.
Three reasons people refinance
- A better rate or terms. If your credit profile or time in business has improved, or rates have shifted, you may qualify for a sharper deal than your original one.
- To free up cash. If you own equipment outright, or have built equity in a financed asset, you can refinance to release working capital. This is the sale and leaseback idea.
- To consolidate. Rolling several higher-cost facilities into one asset-secured loan can simplify the books and cut the total cost.
Freeing up cash from owned gear
If your business is asset-rich but cash-tight, refinancing equipment you already own is often cheaper than an unsecured business loan, because the asset secures the deal. You keep using the gear and repay over an agreed term. We cover this in detail in our guide to sale and leaseback.
The trade-offs to check
Refinancing is not automatically a win. Before you switch, weigh:
- Exit or break costs on the existing facility, which can eat the saving.
- The total cost over the new term, not just the monthly payment. A lower repayment over a longer term can cost more overall.
- Tax and accounting consequences, especially if you are releasing equity or changing structure. Check these with your accountant.
- The asset's value and age, which set how much you can refinance and on what terms.
When it is worth it
Refinancing makes sense when the saving or the freed-up cash clearly outweighs the costs of switching, and when the asset still has genuine value to lend against. A broker can compare your current deal against what the market offers now and tell you honestly whether it is worth moving. For the structures involved, see business equipment finance structures.
This is general information only and not financial, credit, or tax advice. Refinancing has costs and tax consequences that depend on your situation. Consider your own circumstances and speak to your accountant. All finance is subject to lender assessment and approval.
Frequently asked questions
When is it worth refinancing an equipment loan?
When the rate saving or the cash you free up clearly outweighs the switching costs, and the asset still has real value to lend against. Improved credit or time in business can mean a sharper deal than your original one.
Can I refinance equipment I own to get cash?
Yes, through sale and leaseback or equipment refinance. You release working capital while keeping the use of the gear, often more cheaply than an unsecured business loan. Check the tax consequences with your accountant.
What should I check before refinancing?
Exit or break costs on the existing loan, the total cost over the new term (not just the monthly payment), tax and accounting consequences, and the asset's value and age. Make sure the saving beats the costs.
Ready to finance your next asset?
Think your current finance could be sharper? Talk to a Ventas broker. We will compare it to the market and tell you honestly if it is worth moving.
This article is general information only and not financial, credit, or tax advice. Ventas Asset Lending is a finance broker, not a lender. Approvals are subject to lender assessment. Consider your own circumstances and speak to a qualified professional, including your accountant for any tax questions.