Asset finance is actually the company’s balance sheet assets. It covers short-term investments and loans.
While the credit facility is the type of loan which allows borrowing money over an extended period of time. It covers revolving loan facilities, committed facilities, and retail credit accounts.
Some companies are not aware of the advantages of asset financing. They usually focus on safe loans to get what they require with the loan. But others use their capital because they believe that new machinery will generate enough money to reach the value of cost. With asset finance, the company doesn’t require capital to get new equipment.
Once you decide to book a truck or any other asset, now you have to focus on the right truck and affordable vendor. Get the invoice from the seller. Now the business owner can approach to asset financier for assistance. This is often a bank or private loan provider.
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Private loan providers consider how financially good a company is. They focus on the company’s balance sheet while processing applications. Some lenders want a proper business proposal with every detail mentioned that how this asset can improve the process of business. Once the application is approved transaction goes into the next step.
Asset financiers directly talk to the company for payment and distribution. Once the asset has been sent, payment can be made instantly.
What are the Advantages of Asset Finance?
Asset finance applications are much faster in processed as compared to standard credit facilities. The amount is usually high in standard credit facilities than in asset finance.
Asset finance is liked by both small and big companies because no extra collateral is needed. If you own a small company and have little assets that can be used as security can acquire the equipment they need to grow and can have much more earnings.
One of the great benefits of asset financing is that the owner does not have to use the company capital to get expensive equipment. This money can be used for the company’s benefit. Buying costly equipment from an asset financing business can grow faster than before.
While some financiers ask for upfront but some don’t. This means that the company owner does not need to spend a single penny on asset acquisition.
In asset financing, payments are fixed and the company can stick to its budget for simple management. The agreement you make with the lenders have usually fixed interest rates. If you fail to pay, it will only loss of your asset, nothing more.
In the asset financing transaction, the asset financier will be in a better security position. It’s a secured payment plan and can minuses all the uncertainty.
No doubt asset finance helps a business to grow. But are there any drawbacks of asset financing? I would say some are, but not greater than the benefits. Drawbacks include:
- Not owning the asset
- Not being a short term solution
Make sure you read all the terms and conditions and proposal detail carefully provided by the lenders before you sign it in.