Big banks won’t usually lend against existing equipment owned by a business unless the goods are only a couple of weeks or months old. Historically, any other lenders that will lend against older equipment have been charging up to 20% for this type of loan.
There are new lenders emerging that are offering a much lower rate, which is great news for equipment-heavy enterprises. “We are now seeing lenders come into the market who will do a sale and lease back for existing plant and equipment based on a market evaluation appraisal”, says Gus Gilkeson, Managing Director of Grow Capital. “So if for example you have five trucks on the road and you need some capital they will allow you to use the trucks as security to borrow, which is something new in the leasing market.” Historically an accountant will advise a business owner to lease cars, tools,
Historically an accountant will advise a business owner to lease cars, tools, plant and equipment and preserve their cash as working capital. However, often what happens is when a business owner needs something quickly they just go and buy it. This can create problems because they don’t have any working capital and in times gone by sometimes business owners will struggle to get the leasing company to give their money back. “This is a big opportunity for business who need working capital to grow, particularly equipment-heavy enterprises such as yellow goods, medical
“This is a big opportunity for business who need working capital to grow, particularly equipment-heavy enterprises such as yellow goods, medical machinery and manufacturing,” says Gilkeson. “Quite often these businesses own their equipment outright. We had one client who owned $8million dollars worth of trucks. They used two trucks for lender security and received a loan at a very competitive rate. The working capital enabled them expand significantly which they couldn’t have done otherwise.”
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