What is asset finance?
Asset finance is a way of financing the purchase of an asset. An asset is a resource or a property owned by a person or a business that creates a positive economic value such as buildings, offices, vehicles, IT software, and equipment.
Asset finance services are provided by asset finance companies, which are usually banks or independent asset finance brokers. The terms and conditions usually vary greatly depending on both parties, but it usually results in the client making periodic payments to the asset finance company that facilitated the transaction for the total amount of the original purchase plus fees, just like a regular loan.
Why use asset finance?
There are several reasons why a person or a business would choose to make a purchase via an asset finance company, such as opportunity costs or tax implications. However, most businesses consider asset financing due to poor cash flow.
Assets are vital for any company, but they tend to be quite expensive, which makes it difficult for small businesses to make up-front payments in full. Therefore, borrowing the money to make such transactions is the best alternative to get the asset they need without affecting their short-term cash flow.
What is asset-backed finance?
Asset-backed finance is when a loan is taken out by a business using its already existing assets as a way to secure payment. Likewise, the assets to secure payments include buildings, offices, vehicles, IT software, and equipment, but this time it can also include inventory and unpaid invoices, also known as accounts receivable.
Asset finance and asset-backed finance are not the same.
In simple terms, asset financing lets a business borrow money to purchase assets while asset-backed financing is when a business borrows money and it uses what it already owns as a guarantee of payment. Similarly, businesses might choose asset-backed financing to alleviate cash flow issues and get quick access to cash, this cash might be used to finance new investments or simply to cover existing costs.
Invoice factoring is a great type of asset-backed financing
Asset-backed finance services can be provided by banks, but the process tends to be lengthy and overcomplicated. Invoice financing companies are a much better and simpler option. Invoice factoring is a process in which a business sells its accounts receivables to an invoice financing company, such as Velotrade, getting quick access to cash even before the client pays their invoices.
In most cases, the invoice financing company releases a major percentage of the total amount due first. Then, they release the rest of the money, minus a fee, once the client pays off the invoice.
Invoice factoring with Velotrade
By selling an invoice, a business can get cash advances based on its accounts receivables.
Velotrade is a web-based invoice factoring solution that provides businesses with immediate cash flow by allowing them to sell your outstanding invoices. We provide small and mid-sized companies accessible and reasonable ways to financing. So far we have helped thousands of businesses (SME’s) financing their working capital needs in less than three days.
This is how the process works:
Velotrade charges a percentage on the invoice amount. You can rest assured that we provide the most efficient service at an affordable rate. Use our calculator to get an estimate of the fees.
Costs vary depending on several factors such as the invoice value, the days financed, the creditworthiness of the debtor, and the length of the commercial relationship.
Are you interested in asset-backed financing for your business?
At Velotrade, we specialize in invoice financing. Velotrade offers all of the advantages and removes the disadvantages when compared to traditional factoring companies. For one, Velotrade’s clients are not locked into a long contract. Second, Velotrade offers flexibility that allows clients to fund only the invoices they want. Third, fees are transparent and straightforward.