Asset finance balloon coming due, what to do in the next 90 days
The final balloon payment on your hire purchase or finance lease is 90 days away. The lump sum is too large to clear from cash, the asset is still core to operations, and the lender wants a decision. You have four refinance routes; the right one depends on the asset's residual value and your trading position.
The 7-day window inside the 90-day window
The 90 days is the strategic window. The first 7 are the tactical one.
- Day 1-2: pull the original schedule, the current balance, the projected balloon figure and any settlement-figure quote.
- Day 3: get an indicative valuation of the asset. For vehicles, CAP HPI or Glass's Guide trade values. For plant, an auctioneer's desktop valuation (£100 to £300 typically).
- Day 4-5: compare the asset value against the balloon figure. Positive equity opens the sale-and-leaseback route; negative equity narrows you to refinance or extension.
- Day 6-7: apply to a refinance lender, or send an enquiry through FundBiz and a business finance broker will contact you about your options.
Your 3 options
Option 1: Refinance the balloon as a new HP. The current lender or a competitor (Time Finance, Aldermore, Funding Circle) writes a new HP against the residual value of the asset, term 24 to 60 months. The asset stays in use, monthly payments are lower than a fresh-asset HP because the principal is smaller, and the original facility closes cleanly. Best when the asset has 3+ years of useful life remaining.
Option 2: Sale-and-leaseback against owned plant. If the company owns other plant outright (no finance against it), a sale-and-leaseback releases cash to clear the balloon. The released equity often exceeds the balloon, leaving working capital headroom. See sale-and-leaseback.
Option 3: Term loan to clear the balloon. An unsecured term loan from Allica Bank, OakNorth, Aldermore or iwoca clears the balloon, the asset transfers to company ownership outright, and the loan repays over 24 to 60 months. Best when the asset is fully depreciated or near end of life and the company wants to own it.
Before choosing, set the balloon against what the asset would sell for now. The balloon and residual value working model shows the equity at the balloon date, including if the value is 25% lower than you hope.
What to avoid
- Doing nothing. A missed balloon triggers repossession rights on HP and early termination charges on lease.
- Last-minute extension at any rate. Lenders facing a missed balloon will offer extension, usually at a higher rate.
- Selling and leasing back informally. Use formal sale-and-leaseback structures only.
- Ignoring negative equity. If the asset is worth less than the balloon, that gap has to come from somewhere. Plan it now.
FAQs
What is a balloon payment on asset finance?
A balloon payment is a final lump-sum due at the end of a hire purchase or finance lease, typically 20% to 50% of the original asset cost. It keeps the monthly payments lower across the term and concentrates the residual exposure into one final payment.
What happens if I can't pay the balloon on the due date?
On a hire purchase, title to the asset doesn't transfer until the balloon is paid; the lender retains the right to repossess. On a finance lease, ownership stays with the lender; failure to pay the balloon usually means the asset is returned and the lessee may face an early termination charge.
Can I refinance the balloon into a new facility?
Yes, this is the most common route. Refinance options include a new hire purchase against the residual value, a sale-and-leaseback if the asset is worth more than the balloon, an unsecured term loan if the asset is fully depreciated, or extending the existing facility with the same lender.
How early should I start the balloon refinance?
Start 90 days before the balloon date. 60 days is workable, 30 days is tight, and inside 14 days the options narrow to short-term bridging or extension with the existing lender at whatever terms they offer.
Will the same lender refinance the balloon themselves?
Most asset finance lenders (Time Finance, Aldermore, Funding Circle, other specialist lenders) offer a balloon refinance as a standard product if the underlying asset still has useful life and the trading position has held up.
Can I sell the asset to clear the balloon?
Yes, if the asset is worth more than the balloon. The lender releases title on receipt of the balloon payment from the sale proceeds. If the asset is worth less than the balloon (negative equity), the gap has to come from cash, refinance or a top-up loan.
Want to talk it through with a broker?
Send an enquiry and a business finance broker will contact you about your options and may introduce you to lenders. FundBiz passes your details to the broker and does not run a credit check. Any lender makes its own decision and may run its own checks.
Send an enquiry →By Adam Parker. FundBiz is owned and operated by Best Business Loans Ltd, directed by Oliver Mackman. Last updated: .