Businesses looking to refinance asset loans after a RBA rate rise may or may not get a better rate, but other credit solutions may deliver effective outcomes. When refinancing, many businesses are seeking a lower interest rate to reduce repayments. When the Reserve Bank (RBA) announces an increase to the cash rate, many lenders will follow with an increase to their own rates. Depending on the interest rate on the current finance, seeking a lower rate through refinancing may be a challenge in this type of scenario, but not always insurmountable.

The commercial credit market is vast and highly competitive and attractive interest rates may be found through the right lenders. Business owners may also find other ways to achieve the same objective as they were seeking with refinancing. These may include restructuring the loan and by considering alternatives to refinancing. Alternatives such as specialised credit products to address the issues which have given rise to the need for refinancing.

As specialists in commercial credit, we work with business owners to source, develop and deliver affordable, workable finance solutions to meet individual requirements. Consider what may be available for you for refinancing in the current rate market and speak with one of our brokers about a custom solution.

RBA Rate Rise Decision Impacts  

The Monetary Policy Board of the Reserve Bank (RBA) announced a 0.25% rise to the official cash rate on 3 February. The cash rate now sits at 3.85%. RBA Governor, Michele Bullock said the decision was in response to several consecutive sets of data from the ABS showing a rise in the rate of inflation. Ms Bullock said the Bank expects that inflation will stay above the RBA’s 2-3% target for some time.

An increase in the cash rate means an increase in funding costs for banks and some lenders. The outcome – many lenders will raise their lending rates across their portfolio. What rates to offer on specific credit products are decisions for individual lenders. This results in variations across the market, especially in the commercial credit sector.

Lenders, especially non-bank lenders, that seek to remain highly competitive, may limit any rate rises. Others may need to pass on any cash rate increases. The challenge for business operators is finding which lender is offering the most competitive rate for the credit facility they require, in their industry, and that suits their financial profile and requirements. Having access to a vast and diverse selection of lenders through our specialist broker services can assist business owners find their most suitable lender and their best rate when refinancing.

How to Refinance Asset Loans

Refinancing  a loan for an asset – machinery, equipment, vehicles, involves sourcing a new loan to replace the existing finance. The reasons that business owners may opt for refinancing can be to get a better interest rate, to reduce repayments to ease cash flow pressures, to restructure finance terms, amongst others.

The process may be achieved with the same or a different asset acquisition credit facility and with the same or a different bank or lender. Costs will be incurred to finalise the existing loan before the end of a fixed term and to establish the new finance arrangement.

Get Best Rates to Refinance Asset Loans

A key objective of refinancing is to achieve a better, or at least the best, interest rate on the new loan. Following a cash rate rise, that will require covering a vast section of the lending market to find which lenders have held their rates or increased them by the least amount. Commercial lending rates vary across the market, with different credit facilities, and for different industry sectors.

While it may be a challenge to find a lower rate than the rate on the current loan, it can be achievable to secure the most competitive rates. What is realistic to consider is that lenders are business operations. When rates rise across a market, borrowers may be deterred from applying for new finance. When demand for any product reduces, businesses need to be more active in attracting customers. Lenders, especially those in the non-bank sector, can be extremely competitive and affordable refinancing rates may be sourced.

With our industry intel and large lender base, we have the facilities and the expertise to assist business owners find their most competitive refinancing interest rate.

As well as seeking the right lender, a better rate may be achieved in a rising market by changing to a different credit facility. Rates differ for Chattel Mortgage and CHP, compared with Lease and Rent-to-Own. For example, if the asset is currently Leased and the business uses the accruals method of accounting, they can refinance with CHP. CHP attracting a lower rate than Lease.

Refer to our latest rates and use the Finance Calculator to compare your options.

Alternatives to Refinancing Asset Loans

Where refinancing with a lower rate is not a realistic option at this time, an alternative approach may be considered. Consider closely the reasons as to why there is a need for refinancing. We may be able to offer other finance solutions to ease pressure on cash flow and to address specific issues in the business rather than refinancing existing loan arrangements.

A Lender Overdraft or line of credit may be a solution to ease any pressure on cash flow which asset loan repayments is creating. If the situation is short-term, this may provide a workable outcome.

Invoice Debtor Finance may also be considered where receiving payment for work from customers is pressuring cash flow. his specialised credit facility allows businesses to receive payment for invoices faster and more consistently for better budgeting and to allow them funds to meet their own commitments.

Connect with Business.Finance brokers on 1300 000 033 to discuss the options and alternatives to refinance asset loans.

DISCLAIMER: THE SPECIFIC PURPOSE IN PROVIDING THIS ARTICLE IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED AS THE SOLE SOURCE OF FINANCIAL INFORMATION ON WHICH TO MAKE BUSINESS FINANCE DECISIONS. BUSINESS OWNERS WHO REQUIRE ADVICE OR GUIDANCE AROUND THEIR SPECIFIC FINANCIAL CIRCUMSTANCES ARE RECOMMENDED TO CONSULT WITH AN ADVISOR OR ACCOUNTANT. NO LIABILITY IS ACCEPTED IN REGARD TO ANY MISREPRESENTATIONS OR ANY ERRORS RE ANY DATA, SPECIFICS, POLICIES AND OTHER INFORMATION AS SOURCED FROM OTHERS.