Raise money against a van you already own

Van refinance, which the finance industry usually calls asset refinance, raises money against a vehicle your business already owns, while you carry on using it exactly as you do now. The vehicle stays with you and keeps working. Typically we can raise up to around 80 per cent of the vehicle's value, depending on the vehicle and your business profile. It works on vehicles owned outright, on vehicles bought recently for cash, and on vehicles that still have finance outstanding, where the advance is based on the difference between what the vehicle is worth and what you still owe.

If you own the van outright

This is the simplest version. There is no existing agreement to settle, so the whole advance comes to you.

The lender takes security over the vehicle, which is the reason this is usually cheaper than borrowing with nothing behind it. Nothing about your working week changes. The van stays in your yard, on your jobs, in your name, and a payment goes out monthly.

Own more than one and the effect multiplies. Three or four vehicles each supporting an advance adds up to a different number entirely from one.

If you bought it in the last few weeks

This is the one with a clock on it, and it is the one most businesses do not know exists.

If your business has bought a van for cash recently, you can often put it onto finance after the event and take the money back out. It is called sale and hire purchase back, or sale and HP back.

The timing matters more than anything else here. Inside the lender's window from the purchase invoice, which is often around fourteen days and sometimes closer to a month, the lender works from what you actually paid and will frequently fund the full amount. Outside that window they stop looking at your invoice and start looking at trade value, and will typically advance 80 to 85 per cent of that instead. Same van, same business, same purchase, and a materially different number purely because of when you asked.

There are plenty of ordinary reasons a business ends up here. The van was being sold privately and lenders will not generally accept an invoice from a private seller. It went through an auction. The seller would not wait while finance was arranged, and a good van does not sit around. Or the business simply had the cash available and did not want to lose the vehicle while paperwork was done.

In each case you get the van you wanted, and the money goes back into the account afterwards. If you want to see how that looks in practice, here is a business that bought a van privately and had it refinanced inside a week.

If there is still finance on it

A vehicle with an agreement running on it can often still be refinanced. What matters is the gap between what it is worth and what you still owe.

If a van is worth £15,000 and your settlement figure is £5,000, there is £10,000 of equity in it. The new agreement settles the old one and that difference is what you can raise.

One thing worth understanding before you start, because most people assume the opposite. Commercial asset finance is not regulated the way consumer agreements are, so there is no automatic rebate of interest when you settle early. Settle three years into a four year agreement and the lender may want the full four years of interest. Some will discount it. Some are more generous if you refinance with them rather than leaving.

That sounds worse than it usually is. Interest is front loaded, so by the time you are three years into a four year agreement you have already paid most of it. The number worth having is the actual settlement figure from your lender, not an estimate, and it takes one phone call to get.

If you have several vehicles on separate agreements

Vehicles financed one at a time can often be brought together onto a single agreement.

The reasons are practical. One set of fees rather than one set per vehicle. One payment and one agreement to administer instead of five. And a single larger advance, which is a different proposition to a lender than several small ones.

It can reduce what goes out monthly, particularly over a longer term. Be clear with yourself about that trade, because a longer term means a lower monthly payment and more interest paid across the full agreement. If the point is to free up cash now, it may be a trade worth making. If the point is to pay less in total, it is not.

Why this is usually the cheapest money a business can borrow

When a lender advances against an asset, they hold security over something real. If it goes wrong they have a vehicle they can recover and sell. That reduces their risk, and it is reflected in what they charge.

Compare that with the alternatives. An unsecured business loan has nothing behind it but your covenant and a personal guarantee, so it is priced for that. Invoice finance, merchant cash advances and the short term products marketed at businesses with a cash flow gap are more expensive again, sometimes considerably.

So if your business needs working capital and owns vehicles, the cheapest borrowing available to you is very probably parked outside.

Whatever you are comparing, ask each lender for the total amount repayable across the full term. That is the figure that tells you what the money actually costs over the life of the agreement, and it lets you put two offers that are presented very differently side by side. Anyone worth dealing with will give it to you without being chased.

The cost of financing a business asset is a business expense, set against your profits in the normal way. How it is treated depends on the structure of the agreement, and your accountant is the right person to confirm the position for your business.

When it is not the right answer

Worth saying plainly, because a page that only sold you the upside would be worth less to you.

Refinancing a vehicle you own outright converts an asset into secured debt. You take the capital now, and in exchange you take on a monthly payment and the lender takes security over the vehicle. If the business cannot maintain the agreement, that vehicle can be recovered, and it is usually how the business earns.

It makes sense when the money has a job to do. Taking on a larger contract, buying equipment that pays for itself, covering a tax bill, bridging the gap while customers pay slowly, putting a deposit down on the next vehicle, or replacing borrowing that costs you more. It makes much less sense as a way of raising cash for its own sake.

And if the existing agreement is nearly paid off, the fees on a new facility can outweigh what it releases. Worth doing that sum before the application rather than after.

It does not have to be a van

This site is about vans because that is the bulk of what we do, but the business behind it, First Oak Capital, arranges finance across cars, lorries, HGVs, coaches, buses, construction equipment and machinery.

If your business owns it and it holds value, it is worth asking about.

What we need and how long it takes

Usually a few months of business bank statements. Where the vehicle has just been bought, the purchase invoice matters too, and the sooner we have it the sooner it can be approved and paid out.

It can be done inside a couple of days. Sometimes it takes longer, and what sets the pace is almost always how quickly the paperwork arrives rather than anything at our end.