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Business owners face a challenging climate. Rising costs, higher taxes and energy bills, and cautious customer spending have put strain on companies across sectors. Industry data show thousands of UK businesses have closed in recent years. In 2025, 34% growth was reported in business equipment finance, highlighting how refinancing machinery is a vital funding channel for asset-rich SMEs looking to boost working capital. At the same time, small and medium-sized enterprises (SMEs) contribute billions to the UK economy and support a large workforce.
In this squeezed environment, business owners may need to tap into all available resources. One option is business loans, using what the company already owns (like its freehold property, vehicles, or machinery) to unlock cash. This article explains what asset refinance means for businesses and the situations in which it might make sense.
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Understanding asset refinancing for SMEs
Asset refinancing (often a type of sale-and-leaseback) lets a business turn owned assets into cash while still keeping them in use. In simple terms, you sell the asset (for example, your premises or expensive equipment) to a finance provider and then lease it back under a new agreement. The business gains an immediate cash sum from the sale but continues to operate as before.
This improves cash flow without taking on extra unsecured debt or giving up ownership of the company. In practice, asset refinance is most suitable if your business is “asset-rich but cash-poor”. In other words, if you own valuable assets outright, like a freehold property or fully-paid equipment, but you need cash for bills, investment or growth, refinancing can be an option. It provides funding to boost working capital, or to cover an unexpected cash shortfall, without relying on your personal credit or existing bank facilities.
When to consider refinancing assets
Businesses typically consider asset refinance when they need a significant cash injection for investment or survival. One common scenario is renovation or expansion. If you plan a major refit like updating interiors, expanding facilities, or adding new equipment, the cost can be substantial. In that case, refinancing the property’s equity can supply funds.
Refinancing your existing property for additional capital could be an effective strategy, particularly if the property you own has significant value. This means if your building (or other assets) has appreciated or holds strong value, selling it to a lender and leasing it back can pay for the upgrade without disrupting operations.
Another trigger is unexpected cash shortfalls. For example, if a downturn in trade, a seasonal lull, or sudden repairs hit your cash flow, asset refinance can provide breathing room. Since this approach does not rely on your credit rating or business performance, even firms that have difficulty getting new loans can access funds.
It may also suit situations where existing loans are costly. If your mortgage or finance hire-purchase has high interest, and market rates have since improved, refinancing can lock in better terms.
In any case, the key precondition is that you own an asset outright – refinancing is usually only available on assets the business owns in full, not those that are currently subject to any existing or outstanding financing arrangements. In practice, this means freehold properties or unencumbered equipment (e.g. vehicles, machinery, IT systems) can be used. Leased or rented premises cannot be refinanced, though you might still refinance fully-owned equipment, if any.
Benefits of asset refinance
Refinancing assets can deliver sizable benefits for a business.
Chief among them is access to capital without giving up equity. Because the loan or lease is secured against the asset, lenders see lower risk and typically offer larger sums, longer terms, and lower rates than unsecured loans.
This means a business owner can borrow more money at a lower cost. For example, a secured loan on a commercial building often allows borrowing several hundred thousand pounds (depending on value) with multi-year terms. The money raised can be used for growth, such as investing in new equipment, hiring staff, or refurbishing premises – all aimed at boosting sales. You continue to run the business and eventually regain full ownership of the asset (once the lease or loan is fully repaid).
In practice, many companies use secured funding this way. Manufacturers, retailers, and service providers can pledge property or equipment as security for a loan for the extension of premises or for their refurbishment. By applying the same idea, a business can treat its property like a piggy bank: the bank pays out the equity, but the business keeps paying the lease or mortgage in affordable instalments.
Compared to options like merchant cash advances or short-term borrowing, asset refinance can be more cost-effective over time. It also does not dilute ownership, because you are not selling shares of the business. Instead, you are simply trading the capital locked in your asset for cash.
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get instant quoteRisks and considerations
Asset refinancing is not without risks.
Repayment obligation
If the business cannot meet the lease or loan payments, the lender can seize and sell the asset to recover their money. This means you could lose your property or critical equipment if operations go wrong. Ultimately, refinancing swaps one debt for another: you free up cash now, but you must repay it (with interest) later. Also, asset refinance deals can involve fees or interest that make them expensive over time, so the company’s projected cash flow must comfortably cover payments.
Asset eligibility
Another consideration is asset eligibility. Not all assets qualify. As noted, only unencumbered assets can usually be refinanced. If your business has an existing mortgage, you may need lender approval or a partial refinancing arrangement. Some lenders will refinance part of the equity (for example, up to 70% of the property value) and roll the old loan into a new package, but this varies.
Tax implications
Finally, owners should account for any tax or contractual implications of selling an asset and leasing it back. In short, it’s vital to run the numbers and ensure the future rent or loan payments are affordable under every forecast.
Other financing options
Asset refinance is one tool among many. Depending on your needs, there may be other routes to explore.
Traditional secured loans (e.g. a commercial mortgage or equipment loan) can raise funds against an asset without a sale-leaseback structure. Unsecured options (like overdrafts, personal guarantees or unsecured loans) generally cost more and may be harder to get if the company’s credit is poor.
Short-term options include bridging finance or merchant cash advances – the latter provides an advance on future card sales. As we explain in our merchant cash advance article, this can provide an excellent source of capital on short notice if sudden repairs are needed, although it can be expensive.
Another avenue might be government-backed schemes. For example, the Growth Guarantee Scheme (formerly the Recovery Loan Scheme) or local business grants can supplement funding.
There are also asset finance products (hire-purchase or leasing) to buy new equipment without a large upfront cost.
Ultimately, the choice depends on cost, speed and fit. Asset refinance shines when you own a strong asset and need medium-term funding. If you only need a small amount of working capital, invoice financing or a short-term business loan might suffice. If you plan a one-off project like a remodel, a bridging loan on the property could work.
How Rise Funding can help
If you think asset refinancing could benefit your business, advice can be valuable. Rise Funding specialises in SME finance and has expertise across multiple sectors. We can review your situation and connect you with lenders who handle asset-backed loans or leases.
Whether you’re running a retail store, manufacturing company, or professional service firm, we offer flexible funding for renovations, expansions, and operating costs. We can help you understand the terms and compare the cost of asset refinance versus alternatives.
In any case, ensure you have a detailed cost plan and cash-flow forecast – this will strengthen your case with lenders. With the right approach, asset refinance can be a smart way to unlock value from your business’s existing investments and keep your company thriving.
To discuss your options, whether it be a business loan, cashflow funding or others, you can call one of Rise Funding’s experts for individualised advice. Contact us through the form below, or get an instant business quote by completing our online questionnaire.
