The year 2020 and 2021 have been a bizarre years for everyone. Our personal and business lives have been impacted in various ways that no one could have ever anticipated. As a result of this, where does that leave us for 2022? What possibilities do we have for our growing business? How can we focus on our business operation in the current market? But some questions might pop up in your mind if you are a business owner. If you are considering finance for your business this is where an asset finance loan might be able to support.
So, what is asset finance? It refers to the business’s assets utilization like balance sheet, inventory, accounts receivable, equipment, machinery, short-term investments, and other assets to borrow money.
It works differently, depending on which type of asset finance loan you select. For example, a hire purchase works by allowing you to spread the cost of buying an asset over a specific time. After you have paid the amount, you will get possession of that asset. On the other hand, in equipment financing, the lender purchases the equipment, and you need to pay a monthly fee to rent them.
So, you have got some knowledge about asset finance. Irrespective of whether you are applying for caveat loans or other types of business loans, you can grow your business if you correctly use the money. But now the question is, why should you get asset finance for your business?
Well, there are many reasons for this. If you compare it with 2nd mortgage loan , you will see asset finance offers multiple benefits- from minimal eligibility criteria and less paperwork to cost savings. Though this type of business financing is not enough for all businesses, sometimes it is wise to take out this kind of loan to reap the below advantages.
In an asset-based loan, the security is already in the asset itself. Due to this, you do not need to provide any additional collateral to the lender. Besides, by offering extra facilities with cash resources and bank credit lines, asset finance provides a quick solution without affecting a businesses current financing arrangements. Thus, this uncomplicated process is another reason behind its popularity.
Unlike caveat loans or other traditional funding types, asset-based financing is secure, and you will not have to pay a higher interest rate. As a result, this type of business loan is much more affordable than traditional funding types based on the company’s credit history. It is because the lender has less risk when they give an asset loan as it is a secured funding type. Hence, it is one of the reason you should consider this for your business.
When you apply for traditional loans, you need to gather numerous documents before approaching a lender. For example, you need to submit your credit report, balance sheet, business plan, and other information related to your business. But in the case of an asset loan, you do not need to bother collecting all these as it involves comparatively less documentation. The lender also processed the loan much faster than a typical institutional loan. Thus, when you urgently require capital, opting for an asset loan can be your best choice.
When you take out a 2nd mortgage loan or other types of finance the terms and conditions of the loan can be restrictive. But if you take out an asset loan, there is less restriction and you can utilise the funding for any business purpose.
Asset finance loans often do not need the entire loan amount with applicable interest to be paid off according to a fixed time. It has more flexible repayment terms as it enables borrowers to pay off the debt at a time most suitable as per their cash flow. Therefore, you will not get such flexibility if you take out any traditional loans. Hence, it is one of the prominent and beneficial reasons determining why it does make sense to take out an asset loan.
Many business owners often face cash flow shortage issues. As a result, they opt for caveat loans to improve their cash flow. If this is also the case for you, you should take out an asset loan. It will assist you in boosting the cash shortage and enable you to get more control over your business expenditure. So, irrespective of whether you are an entrepreneur or have a well-established business, asset finance can be an invaluable financial solution to support your business. As this type of business finance allows your firm to use the assets as collateral, it will help you improve your cash flow and the company’s productivity more rapidly.
Streamlined Balance Sheets
When you take out any traditional loan, the balance due emerges on the balance sheet. Some asset-based loans do not get documented that way. For example, if you traded your outstanding invoices to a factor in exchange for urgent cash, there would be no balance to display on the balance sheet. All you require to do is note down how you have managed the transaction on your financial statements. This process is known as off-balance-sheet financing. This streamlined balance sheet is another significant reason to take out asset-based loans for a company’s growth or expansion.
Therefore, these are the reasons why more and more business owners are opting for assent finance instead of 2nd mortgage loan and other funding alternatives. After the catastrophic pandemic, if you want to concentrate more on growing your business, asset finance can be a valuable option for you. Therefore, do not waste time and apply for a loan to make your business a growing and successful one.