Asset finance is the practice of using a company’s balance sheet assets (such as investments or inventory) as a security to borrow money or take out a loan against what you already own. It can provide a secure and easy way of getting working capital for your business.
Various things can be offered as collateral, from inventory, machinery and even buildings. For example, a transport company may use its vehicles as an asset to secure finance against. The amount loaned will usually depend on the value of these assets which the finance is secured against.
Why Use Asset Financing?
Asset financing is often used as short-term funding solution - to pay employees, suppliers or to finance growth. It provides a more flexible way of borrowing compared to traditional bank loans. For growing businesses and start-ups especially, it provides an easy way to increase working capital.
Advantages and Disadvantages
Advantages of asset finance:
- Easier to obtain than traditional bank loans
- Fixed payments make budgeting and cash flow simple to manage
- Most agreements have fixed interest rates
- Failure to pay only results in the loss of assets, nothing more
Disadvantages of asset based finance:
- There is the risk of losing important assets required for running a business
- Value of the assets which a loan is secured against can vary, with the possibility of low valuations
- Not as effective for securing long term funding
Asset finance can help many businesses, but it’s important to be sure this financing method is right for your business model.
How MarketFinance Can Help
At MarketFinance, our invoice discounting solutions provide an advance against your outstanding customer invoices. We offer funding against select invoices, as and when you need – or you can also get regular funding through our whole ledger solution.
It’s quick and easy to access funds, which means you can get the cash flow you need to get on with business. With MarketFinance, you get:
- Fast funding: quick funding decisions and set-up
- Hassle free experience: easy to use digital interface
- Help in real-time: personal customer support
- Straightforward costs: no hidden fees
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