25 May, 2023
In the face of the current gloomy economic environment and with the recent flooding now having affected many people in some parts of the country, many are having their financial resources stretched and having to re-evaluate both their personal and business finance circumstances.
As part of this evaluation, restructuring existing business asset finance commitments may be an option to ease any current short-term cash flow constraints.
Restructuring your finance can be a good option if it reduces your current monthly repayments to:
- to create positive cash flow in the business, enabling you to pursue other opportunities; or
- to allow you to continue to meet other critical business expenses.
However, any ability to restructure your existing finance obligations, will be at the sole discretion and judgement of the lender(s) that currently supports you and will need to be considered carefully, particularly if your business is facing financial difficulty.
For existing business asset finance specifically, your ability to restructure will generally involve consideration of the following important key factors:
- Your business’s current financial position – establishing that the challenges you are facing are just short-term and that the business has quantifiable opportunity in front of it once the short-term issues are resolved that will see it return to a successful profitable business that is cashflow positive after all expenses.
- Interest rate changes – looking at to what extent any restructure of existing fixed term finance sees your interest costs increase, which may not be able to be offset by increasing terms to reduce monthly payments.
- Opportunity to extend finance terms – this will generally depend entirely on an assessment of what equity exists in the Asset(s) that you have financed, relative to the current finance balance and what the remaining economic life is of each financed asset.
- Use of other finance free assets as security – subject to assessment of the above, there may be an opportunity to use other finance free business assets as additional security with any restructure. This requires each asset to be valued and an assessment made on its remaining economic life, which would then shape any restructuring terms.
- Funder appetite – the extent to which any lender or asset financing company can support you will depend on their appetite for risk, which will be influenced by their funding mechanisms and credit policy. Subject to this you may have an opportunity to either consolidate your existing finance by refinancing with one funder or spreading the risk over a portfolio of lenders.
It is critical that if you are experiencing any financial or business challenges that you, as soon as possible, contact the lender(s) that support your business and proactively work with them to work through any short-term problems you might be experiencing.
One of New Zealand’s leading equipment financing companies, Speirs Finance specialises in funding new and used business assets and we have the expertise in our team to assist you in considering restructurings of any finance that you have with us currently, as well as being able to help you with any consideration of refinancing finance that you may have elsewhere. Please contact us and we’ll have one of our experienced team contact you to work out how we might be able to best support you.