Let’s go over each of them in no particular order.
Working Capital Refinancing. There are times when a business may require additional funds for working capital to finance growth, a slow period, or some other reason. In these situations, it can be possible to access the equity held in specialty trucks you already own. This is accomplished through a term loan or a sale and lease back transaction where financing is provided based on both the equity held in equipment and the remaining useful life of the truck or trucks to be refinanced.
Existing Loan or Lease Refinancing. In this scenario, a business owner or manager may decide to refinance and existing loan or lease outstanding on one ore more trucks in order to 1) get a better rate, increase the remaining repayment term to lower payments, and/or access additional capital for the business. Many times a loan or lease may have been substantially paid down resulting in significant equity being available in the truck which can potentially be accessed if refinancing of the existing loan or lease can occur. Truck refinancing can be through the existing funding source or it could come from an unrelated funding source.
Balloon Payment Refinancing. Its not uncommon that truck leases are structured with a large balloon payment at the end of the term which is due and payable when the financing term is complete. If the business does not have enough cash to cover the balloon payment, or does not want to drain cash when making it, if the objective is to retain the truck, the next best option would be to refinance the payout amount over a longer term through a new loan or lease.
In some cases this is an intentional strategy right from the outset in that the business owner enters into the initial lease that comes with a large balloon payment with the intent of refinancing the balloon at the end of the term. As long as the condition of the vehicle and remaining useful life of the vehicle are sufficient to support another loan or lease, this is very doable.
Refinancing can also be accomplished with good, not so good, and even bad credit, provided that there is sufficient equity in the truck to offset any credit issues. Also keep in mind that rate is directly related to credit so weaker credit will generate higher financing rates.
Refinancing also means that you are arranging financing on used equipment that has been under your control and is not being sold through a dealer, so rates will also be higher for “A” credit profiles due to asset age and ownership history.
The best way to find out what your specialty truck refinancing options are is to give us a call at 905 690 9874 so we can quickly review your current situation and go over truck refinancing options that are available to you.