Asset financing is using a company’s balance sheet assets (such as investments and inventory) as collateral to borrow money or borrow against something you already own. It can provide a safe and easy way to get working capital for your business.
In financial accounting, an asset is a resource owned or controlled by a company or entity. It is anything that can be used to create positive economic value. An asset represents the value of an asset that can be converted to cash.
Asset Finance Services – Helping You Grow Your Wealth
Asset finance may provide some of the following advantages to businesses:
- Small or no upfront costs when purchasing high-value items
- Spreading the cost of the item over several payments
- Fixed payments make budgeting for regular payments easier
- Preserves capital for ordinary business purposes
- Risk of deprivation in the value of the asset fails on the lender
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How asset finance impacts your business
Any asset can be funded if it provides acceptable collateral to the lender. Historically, the asset finance industry funded everything that was Durable, Identifiable, Moveable, and Salable (DIMS). Modern lenders may have a broader view of the types of assets they can finance.
The range of assets in real estate financing is very wide, ranging from agricultural machinery to Xerox machinery. Failure to maintain payments on asset financing agreements can result in the lender owning the company’s equipment, which can pose serious risks to the company.
Limits of Asset Finance
Loan limits vary from lender to lender, but it is not uncommon for asset finance to raise amounts from as little as £1,000 up to £10m.
Can any of your second-hand assets be financed?
yes. Asset finance lenders may consider used equipment for financing. Asset financiers will want to prove that equipment is worth its imputed value and is in good working order.
Why Use Asset Financing?
Securing the use of assets
Capital expenditures to purchase assets can hurt a company’s working capital and cash flow. Asset financing gives businesses access to the assets they need to operate and grow their business, while maintaining the financial flexibility to allocate funds elsewhere.
Outright asset purchases can be expensive, risky, and discourage business expansion. Asset financing provides a viable option to acquire the assets your business needs without overspending.
In real estate financing, both lenders (banks and financial institutions) and borrowers (corporations) benefit from the structure. Asset financing is safer for lenders than financing with traditional loans.
A traditional loan requires you to lend a large sum of money that the bank hopes to recover. When banks lend out assets, they at least know they can restore the value of the asset. Additionally, assets can be seized by the lender if the borrower defaults.
Securing a loan through assets
Asset Finance is also a company that wants to secure a loan using balance sheet assets pledged as collateral. Companies will use asset finance instead of traditional finance, as lending is determined by the value of the assets rather than the creditworthiness of the company.
When a company defaults on a loan, its assets are forfeited. Assets pledged against such loans may include PP&E, inventory, receivables, and short-term investments.
Early-stage small businesses often face problems with lenders because they lack the creditworthiness or track record to secure traditional credit. Asset finance allows you to get financing based on the assets you need to fund your day-to-day operations and growth.
Often used for short-term funding needs, requiring a short-term increase in cash and working capital. The funds will be used for many items such as: B. Employee Wages, Supplier Payments, and Other Short-Term Needs.
Loans are usually easy and quick to obtain, making them attractive to all businesses. Fewer conventions and restrictions, more flexible usage. Loans usually come with a fixed interest rate, which helps companies manage their budget and cash flow.
