It is important to know what is asset finance and how it can be used before you try and get this financial help from a bank or financial institution. This kind of finance uses balance sheet assets, such as short-term investments, inventory or account receivables to lend money to needy entrepreneurs when they need the finances to resurrect their business or start or expand projects. The concept behind asset finance requires a private institution to buy a piece of machinery on the businesses behalf and let them use it for a monthly fee. This kind of finance is different from the usual financing avenues such as equity or debt securities. Here the company that borrows the money pledges something in order to get the quick loan in return.
An asset based loan is the kind of loan that is secured against an asset. It also means that if the borrower is not able to repay the loan, they have to surrender the asset to the lender. A mortgage is in a sense a type of Asset based lending. In the larger sense this kind of lending for big corporations and business pledges assets that are not used normally in other loans. Inventory, machinery, accounts receivable and equipment are typically tied to these loans.
The usage of asset based loans cover wide areas of business including vehicles, construction, machinery, agriculture, engineering, and several other aspects where assets are involved. This makes it a great tool for raising finance at a short notice and for a short term. Some institutions even offer short term loans against luxury items that are used at households and commercial establishments. Institutions that lend these short term asset based loans normally do not check the credit history of the clients to whom they are lending money. The loans are usually approved and disbursed within a matter of a day. The Asset based loans are usually considered as the last bastion when all other financial options fail and are very popular among enterprises that do not have great credit rankings or the patience to find the money through traditional avenues.
Another type of finance is Construction Finance, which is a boon for builders who tend to run their businesses on tight finance. Continuous cash flow in a construction business is important as a lack of it will bring operations to a halt. Construction plans and machines are significant parts of a construction business, and they are usually required whenever a new construction project is started by the builder. Therefore, short term asset based finances are the best for such businesses.