How Can Loanable help me with Asset Financing?
There are times when many businesses experience a “cash-flow” problem. The company may be financially sound, sales are good, profits where they need to be, however, the company may be short on cash at a particular moment.
This cash-flow issue could be due to a number of reasons, the company may be in the midst of expansions and additional cash is needed for this growth, or it could be equipment or machinery is in need of updates or repairs.
Maybe the company needs money to purchase additional stock or supplies for more orders.
It could also be that the business has a slow period for part of the year. The company has seasonal sales, and is in need of some extra money during their slow period.
For whatever reason the company is in need of additional cash to grow and continue on.
That is where asset financing can help, and so can Loanable!
Asset financing is different than asset-based financing. Asset-based financing is when a company, or an individual, borrows money in the form of a loan to buy something, such as a vehicle, equipment, something physical. This item then secures the loan as the item purchased becomes collateral for the loan.
Asset financing is different as a company uses is assets, which are in the form of receivables, and are pledged for a loan.
Asset financing is usually for short-term loans, loans that may be paid back within 30 days or longer, when the company receives payment for the pledged receivables.
Asset financing can also involve a company’s equipment, vehicles, or machinery, which is used to secure a loan, the equipment is pledged as security for the loan.
Asset financing is good for not just for companies experiencing cash-flow issues, but also new companies which may not have a proven track record of sales, or an established credit rating.
By pledging future receivables, the company can get the money and financing they need now, as opposed to waiting for the accounts to be paid.
Types of Asset
Hire Purchase: This form of financing is similar to an individual using hire purchase to buy a car, or other item. The company takes out a loan against the equipment or asset they need to purchase, and make the payments. After all the agreed instalments have been paid, the company owns the item.
Equipment Leases: This is where a company rents or leases a piece of equipment for a set period of time. While the company has use of the equipment it is leasing, it does not own the equipment. When the lease expires, the company gives the equipment back.
Operating Leases: These are short-term leases, or rental agreements. Maintenance of the equipment is the responsibility of the lender, not the borrower. Equipment under these terms is usually;eased out again to other companies when it is returned.
Asset Refinancing: This is where a company with assets uses them as security for a loan. The asset(s) are collateral for the loan, these can be physical assets, or receivables. The loan amount is based on the value of the assets being used.
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The benefits of Asset Finance
- Access to cash that is tied up in equipment or other assets
- Not a lot of paperwork involved or time, so quick access to cash
- In some instances a company can only pay for something for the time they require it (Operating Leases)
- Flexible terms
- A way to stay competitive and have the latest equipment
- Good for start-up companies or those without proven track records