In the simplest terms, business asset funding is a financial solution offered by lenders to help companies and organisations obtain loans to cover the cost of particular purchases. For example, if a business wanted to buy a new set of desks for its office to comfortably accommodate 50 employees, they might not be able to pay for the desks outright and may turn to financial lenders.
The borrower will then need to prepare an application with or without the help of a reputable finance broker (who can help to increase the chance of approval), before submitting their claim to a local lending company. The lender will then evaluate the application, including the borrower’s potential to repay what they are planning on receiving.
Factors such as credit score, financial history and more will be checked – and if all appears in order, a lender could be willing to provide the requested sum within a matter of days
What does business asset financing involve?
After the initial application period, and if the borrower’s claim is successful, they should receive the required amount of cash that can be spent on whatever assets they wish to buy. In order to confirm this agreement, both parties (the lender and borrower) will need to sign terms pertaining to the repayment of the loan, as well as the defined interest rate; be it fixed or variable in nature.
Once approved, the borrower will be responsible for meeting their repayments, but where regular loans will often have other terms; those that rely on business assets will turn to another form of collateral, just in case the borrower can’t feasibly pay back what they’ve borrowed. What is this collateral? It’s in the name of the type of funding!
Business assets are exactly that – assets that are used for a company to maintain its productivity. If a lender agrees to provide $100,000 AUD to cover the cost of a piece of heavy machinery for example, then within their contract they will state that, should the repayments not be kept up with, the value of the asset will be recouped by repossessing the asset itself
As complicated as this might sound, in reality it can be fairly straight forward when properly understood. If an asset had a value of $100,000 AUD and the borrower was unable to meet their repayments after paying back a large percentage of what was owed, most lenders will be willing to repossess the asset, sell it and then split the cash.
In some severe agreements, the entire cost of the equipment can be lost to the borrower and this is why experts recommend hiring an equipment broker; simply to help to ensure that these types of terms are as fair as possible without taking a huge toll on the borrower’s losses, should they fail to repay what they owe.