Proper cash flow management is the most vital component of managing a successful business. For a large number of limited companies, unexpected cash flow problems can appear from nowhere through the costs associated with expansion, market changes, or other unpredictable costs. However, one common way to ensure improved cash flow for your business is by remortgaging the property your company owns. This article outlines how remortgaging a limited company could assist with the cash flow issues and provides more useful information.
What Is the Definition of a Remortgaging a Company?
Remortgaging defines the replacement of your current mortgage with a new one from either the same or a different lender. In general, people seek to remortgage because, for the majority, they experience better interest rates or other aspects of the more favourable terms regarding the existing mortgage. In cases of a company, this primarily involves the loan against commercial properties or real estate’s owned by it.
Remortgaging a limited company is a strategic financial decision that can have significant implications for your cash flow, particularly if you’re looking to release capital or secure more favourable repayment terms. Let’s dive into how this can be beneficial.
1. Release Equity to Improve Working Capital
Remortgage is primarily for the freedom to unlock some equity in a property. Equity is simply the difference between what your property’s value is and the amount still owed on a mortgage. So, you’re able to take this equity from remortgaging as a cash lump sum that you then re-invest into the business.
For example, if your business owns commercial property and its value have increased since you bought it, then the value increased can free up through remortgaging. You could then use that cash to settle short-term costs such as bill paying, buying of inventory, or hiring staff-this all could have a positive impact on your company’s cash flow.
2. Smaller Month Amortization through a Better Interest Rate
Yet another way in which remortgaging a limited company can help with cash flow is that you can often get a better interest rate on your mortgage. You must by now possibly have had your mortgage for some years; therefore, interest rates could have changed from when you actually first took out the mortgage. You might be able to get a lower interest rate through remortgaging and thus lower your monthly repayments.
Lower repayments mean more cash is available to reinvest in your business, pay off debts, or cover operational costs. This can be especially valuable if you’re going through a period of financial strain or have ongoing projects that require funding.
3. Extend the Loan Term for Lower Monthly Payments
Remortgaging will actually benefit you with a lowered interest rate. At the same time, this may already be your opportunity to stretch the loan term. It would spread the payment period on the mortgage; hence, every instalment becomes relatively cheap.
This frees up more cash to be used on a daily basis and eliminates monthly payment stress. It is particularly helpful if you expect future growth and require maintenance of cash flow for new projects, marketing campaigns, or new staff hires.
4. Debt Consolidation- Streamline Repayment
Most of the debts in many limited companies are from loans, credit lines, or credit card balances. This would mean that multiple debts would therefore give complex management often having different repayment dates.
You remortgage your commercial property to roll all your business debts into one single repayment. When you roll all your business debts into one, it gives you the better picture of your finances, and you normally achieve a lower overall interest rate. This makes your finances more manageable, and you are not keeping track of many different obligations for debt payments. This would make you efficiently manage your cash flow and increase your business.
5. No More Short-Term Loans Required
If you have cash flow issues with your business, you might borrow short-term or worse, have credit lines drawn up to float things. It gives you short-term relief but usually at an inflated interest rate saddling your business with strict repayment terms.
It acts as a substitute in the use of expensive financial instruments. It helps relieve you of that heavy high interest debt through the remortgaging process therefore leaving room for you to exploit cash off of your commercial premises. It becomes a control in the book keeping of finances into your companies. This ensures proper cash flow hence improving the flow in the future.
6. Remortgaging as an implementation tool for the growth in the Business
A more flexible mortgage arrangement also helps your business grow. Be it an increase in employees, development of a new product, or expansion of the premise-in all such scenarios, having extra funds always proves to be useful in investing in such opportunities.
With remortgaging, you essentially free up that released equity to enable you to spend it on business development so that you get the amount of money necessary to fuel growth while providing for good cash flow. This pro-activeness in business finance lets you prepare for tomorrow while ensuring your daily operations runs like silk.
It is very effective in a remortgage on a limited company to improve cash flow and, indeed, to help long-term business success. It matters not whether its equity release, interest rates, consolidating debt, or freeing up cash for growth – remortgaging provides that flexibility on the finances you need.
However, one needs to tread remortgaging steps with caution. First, consult a financial advisor or a commercial property mortgage broker who can give you an assessment as to whether remortgaging is for your company or not. Properly planned and executed remortgaging will manage your cash flows and keep your business on the right track to continued prosperity.
