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We put asset finance under the microscope and find out just what it is

While the majority of people are used to dealing with money when it comes to finances, many companies prefer to use a different form of finances when they are searching for thing such as loans or additional working capital in order to ensure that they have the money they need to carry out their work.

With asset finance, things are done quite differently to traditional methods. Companies use assets instead of actual financial power in order to seek investment or short term loans. This can be quite an alien concept to people who are more used to personal banking, so today we're going to take a look at exactly what it entails.

We'll start with the most basic, as well as the most straightforward way of using asset finance to your benefit. Let's say, for example, that your company is owed money from other companies or individuals for goods or services, however there is a thirty to forty five day wait between provision of said goods or services and the due date.

Rather than being without money for that period, you can approach a financial institution and request a short term bridging loan for a certain amount, on the basis of the fact that you will be paid back by your customers shortly. This is known as the accounts receivable approach.

Another way of doing things, which is starting to become an awful lot more common given the current economic climate, is to use company inventory in order to leverage finances.

By taking this approach, the company agrees that if they have not paid back the loan within the given time frame, the financial institution or individual will be able to take ownership of the inventory pledged to them. This could be land, computers, office furniture, products or anything else that can be used as collateral.

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