Asset finance is one of the useful funding arms extended to individuals and businesses when they are in need of funds for renewing or promoting business. What is asset finance and how does it work? Balance sheet assets such as inventory accounts receivable and short-term investments are used to get loans or borrow a sum of money, and security is provided by the borrower on the assets to the lender. The loan acts in conjunction with the laws of traditional loans and institutions, and the company or the borrower simply pledges some assets in exchange for money.
Any kind of loan secured by pledging assets is known as asset-based lending, and the conditions usually imply that the asset is to be retained by the lender if the borrower fails to return the loan within the agreed period and terms. You could say that a mortgage is also a kind of asset-based loan. However, the term asset based lending is only applied to big and small businesses and individuals who take a loan by pledging assets to a bank or financial institution.
Individuals can also avail themselves of this type of funding to raise short-term finance, and the small business sector tends to benefit the most from this kind of funding. Sometimes luxury cars, wine collections, or vintage articles are pledged in order for the individual to get access to asset based funding. Most of these loans go through without much scanning such as credit checks and usually the loans are disbursed by the asset finance company within a day or two. Asset based truck finance is a great funding model highly beneficial for a fleet, or individual owner as it would help to bring in good returns and a borrower has no chance of defaulting on the loan because truck businesses have great track records as money making instruments.
When all doors are closed for the borrower, asset financing companies stand as the savior as they don’t ask many questions and don’t scan your past records. You are likely to receive the loan within a very short period of time – sometimes just 24 hours, and you can carry on with your business without anything blocking your road to progress. The asset finance companies are non-conventional hence they don’t need to ask permission from other people to grant asset based funding to entrepreneurs. If you belong to the SME sector and need finance you will not find a better avenue than asset finance because it is easy to obtain, hassle free and you agree to repay the loan on your own terms and revenue cycle.