What is Asset finance?

3 Minutes Read

Asset finance is an arrangement that allows a company to manage its personnel, machinery and office equipment. Asset finance is becoming increasing popular as many companies are now using this method to expand their company infrastructure. The financial asset of a company can either be tangible or intangible; it can also have the following characteristics:

1. They are easy to liquidate. The assets should be easily converted to cash when the need arises. It is common for governments to liquidate assets to raise capital for a project or support the country’s economy; likewise, a company can liquidate its assets to pay debts or support a new idea.

2. The asset must generate compensation. An asset is referred to as performing asset when the asset has the potential of generating high compensation.

Benefits of Asset Finance

  • It saves capitals: The cost of buying new equipment can sometimes make it impossible for the company to invest into another project. Asset finance offers the company an opportunity to implement a new business idea and gives room for new opportunities.
  • Makes budget management easy: it gives the company room for planning and budget as it brings in regular income over a fixed period. This brings value to the business.
  • It gives room for new opportunities.
  • It is flexible: Different arrangements can be made. This flexibility makes it useful to the company.
  • Helps in maintaining other credits: You can consider finance assets and at the same time consider a loan for a bank. Both can operate simultaneously.

An asset does not only refer to machinery or equipment; it also extends to any item or person that is valuable, useful, can give value and be an advantage to a business. Asset finance is a handy tool that can be used when a business is in financial trouble.

There are many benefits that can be derived when one uses asset finance option. These benefits include that it gives the business an opportunity to save capital and invests into other ideas and new opportunities. It gives the business room to grow.