Asset Based Financing FAQs For Entrepreneurs

August 17, 2017 by CNH Finance, LP in category “Financing”

At CNH Finance, we frequently see questions from business owners asking about the finer points of asset based financing. Even when we read financial news sites, questions about asset based financing make a lot of assumptions on the part of the reader, and the answers do not give entrepreneurs a strong foundation or understanding about the benefits, or even how asset based financing works. In order to help and inform, we have compiled some of the more frequently asked questions about asset based financing for business owners.

How do assets provide capital?

Let’s start with the very basics. Your fixed assets – as in, those owned by the business – have an intrinsic value. The value of those assets is used to create a source of working capital for your business.

Do I lose access to the assets I use for financing?

Not at all. Businesses still retain use of equipment, vehicles, and facilities. Receivables, inventory, and other assets are also retained, because that would go against the purpose of asset based solutions, which is promote growth for businesses of all types.

Is asset based financing a loan?

Not in the traditional sense. With loans, businesses usually take on debt in exchange for capital, and their credit ratings are negatively impacted. Asset based solutions do not place any debt on the balance sheets, nor are they detrimental to business credit ratings. In fact, many businesses use asset based lending as a means of building up credit ratings.

If asset based solutions are not loans, then what are they?

Asset based solutions provide a revolving line of credit to businesses. Instead of taking a lump sum of capital, businesses can draw from the line of credit, as needed. Like any other revolving line of credit, the amount used is then repaid with interest, thus replenishing the financing available.

How long does asset based financing last?

The financing available does not disappear after a set period of time. Businesses can use the line of credit indefinitely, and having an extra source of working capital is preferable to taking out loans and placing more liabilities on the balance sheets.

Does the amount of financing fixed?

Not at all. The amount of financing available changes to reflect growth and success in your business. As your business acquires new assets, upgrades equipment, or sees a rise in receivables, the amount of financing available will also increase.

If you would like to learn more about asset based solutions, contact the experts at CNH Finance today.

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