Refinancing to improve cashflow

Written By Kim Manunui

While we’ve done a great job bringing down inflation and interest rates and generally setting ourselves on a path to economic recovery, the latest geopolitical events that are hopefully short lived highlight the need for flexibility, to that end its timely to take a look at options available if they’re prolonged.

Interruptions in supply chains, rising import costs, particularly on fuel, can have an effect on cashflow, especially if they’re absorbed, what can we do to mitigate it?

Flexibility in finance, structuring to seasonal requirements and matching the useful life of the asset rather than lending limits are all principles that can be employed to lower the financing effects on cashflow.

For example a new machine on low sub-vented interest rates is all good but generally come with limited terms and higher payments where re financing the balance back over the useful life of the asset can alleviate stress on cashflow, at the same time factoring lower payments in the off season that can be caught up on once it all comes right again.

Short term funding instruments such as trade and invoice finance can fill gaps while releasing equity in equipment can also be a good source of capital raising.

Ideally debt is to be paid off sooner rather than later as it costs less ultimately however structuring to make it workable is just as important.

Not all banks and finance companies are created equal with funder requirements setting protocols for lending so some will have appetite for scenarios others may not, each with their own set of strengths, that’s where working with a broker can cut to the chase and get it sorted, its what we do.

As the days, weeks and months roll on and developments evolve, well see if there’s any need to act, in the meantime its good to know there are options available that can be worth exploring should the need arise.

Written by Brian Coogan, Licensed Financial Adviser and Director at Infinance – Taupo

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Never take your eyes off the cashflow because it’s the lifeblood of business – Richard Branson

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