Refinance options for SMEs with capital tied up in equipment
For many firms, their biggest challenge is navigating the timing mismatch between when costs need paying and when income arrives. Initial project setup and operating expenses can fall due early, while payment cycles take longer to convert into cash in the bank.
This is why cash flow remains front of mind for SMEs. Close Brothers’ research with 900 SMEs across the UK and Ireland found energy costs (42%) and inflation (42%) among the leading concerns, alongside interest rates (34%). More than half (57%) said rising costs have impacted profitability.
The same research also points to a shift in how businesses view external finance. Over half of SMEs see using finance to protect cash flow as a good strategy, and 34% reported missing an opportunity in the last 12 months because they didn’t have facilities available when it mattered.
Where refinance can help
In asset-heavy businesses, substantial value can sit in machinery, vehicles and specialist kit. These assets are central to delivery, but the capital tied up in them isn’t always easy to access when cash flow tightens.
When businesses need to unlock additional headroom without sacrificing productivity, refinancing is an effective strategy. By leveraging assets already in use, companies can access funds while continuing to benefit from their equipment. Since this type of facility is secured against existing machinery, it offers an alternative funding path, tying borrowing directly to tangible resources.
Sale and hire purchase back in practice
A common refinance structure is sale and hire purchase back. A business sells an owned piece of equipment and then immediately hires it back, continuing to operate it as normal. The business receives funds upfront and repays the facility over an agreed term.
For firms managing fluctuating pipelines or unexpected cost increases, the appeal is that refinance can support cash flow without pausing operations and continue to pursue growth plans without having to make other sacrifices.
How refinance fits with other funding routes
Refinance can be effective, but it isn’t the right tool for every need. When a business is purchasing new or replacement equipment, hire purchase or a finance lease may be more suitable, spreading costs in a planned way while preserving operational headroom.
And where cash is tied up in invoices rather than assets, invoice finance can release funds against unpaid invoices, helping businesses avoid waiting for payment terms to run their course before reinvesting into delivery.
Close Brothers Commercial Finance supports SMEs with asset-aligned facilities designed to build flexibility and resilience, particularly where maintaining momentum matters. Get in touch to find out what kind of financing could suit you.
