What Are Examples Of Asset-Based Finance?
For businesses in New Zealand, accessing funding to grow and expand can be a crucial aspect of their success. Asset finance offers a versatile solution, allowing businesses to unlock the value of their existing or new assets to obtain the capital needed for a wide range of purposes.
This blog will explore several examples of asset-based finance, chat about how it can help grow your business and explore some key features and benefits of this approach.
Asset Finance: An Overview
Asset finance is a type of funding that enables businesses to leverage their tangible assets – including equipment or machinery – to secure loans or lines of credit.
Using these assets as collateral allows business owners to access capital when needed and fund their growth initiatives without selling their assets outright. Asset finance provides a flexible and efficient way to raise capital quickly, making it an attractive option for businesses seeking to expand and invest in their future.
Unlocking the Value of Equipment
One of the most common examples of asset finance is using equipment as collateral to secure funding. So, if your business owns valuable machinery or vehicles, you can use them as collateral for a loan.
This allows you to access the seasonal cash flow you need to invest in new equipment, upgrade existing assets, or finance other business activities. The beauty of this approach is that your business can continue to use the equipment while benefitting from the additional working capital.
Accounts Receivable Financing
Accounts receivable financing, invoice or factoring are other types of asset finance. In this scenario, businesses can use their outstanding invoices as collateral to secure immediate funds from a lender.
Rather than waiting for customers to pay their invoices, businesses can access a significant portion of the invoice’s value upfront. This approach helps improve cash flow and enables businesses to meet immediate financial obligations or invest in growth opportunities without delay.
Real Estate-Backed Loans
Assets Finance could also be applied to real estate holdings. This means that if your business owns commercial or industrial property, you can use the property as collateral to secure a loan.
Real estate-backed loans provide access to substantial amounts of capital, which can be used for a broad range of purposes, such as expansion, renovations, or refinancing existing debt. These loans often come with favourable terms and lower interest rates due to the added security provided by the property.
Key Features & Benefits
Asset finance offers several key features and benefits for your business:
- Quick Access to Capital: Asset-based finance allows businesses to access funds in a time-efficient manner.
- Diverse Funding Options: With asset finance, businesses can explore various financing options based on the type and value of their assets, tailoring the solution to their unique needs.
- Improved Cash Flow: Asset finance, such as accounts receivable financing, helps improve cash flow by providing immediate access to funds that would otherwise be tied up in outstanding invoices.
- Asset Preservation: Businesses can secure funding by using assets as collateral without selling or disposing of their valuable equipment inventory.
- Flexibility in Use: The capital obtained through asset finance can be used for various business purposes, from equipment upgrades and expansion to working capital management and strategic investments.
Get in Touch
Asset-based finance provides businesses in New Zealand with a versatile and efficient way to access capital for growth and expansion. Examples of asset-based finance include using equipment, accounts receivable, and real estate as collateral to secure loans or lines of credit.
By leveraging your tangible assets, you can unlock the value tied up in these assets and use it to fund your growth initiatives. Asset finance’s key features and benefits include quick access to capital, diverse funding options, improved cash flow, asset preservation, and flexibility of use.
For businesses seeking a flexible and practical financing solution, asset finance is a powerful tool to fuel their success and drive their growth. If you want help to secure asset-based finance for your business, GVK Finance can help.