Trade finance or asset finance are essentially methods for developing businesses to take the step required for growing their business further. If your business is looking to expand but you need funding to facilitate growth, a specialist could introduce you to the ideal cash flow solution.
Read on to find out about the advantages of trade finance or asset finance and how they could help your business.
Also referred to as ‘order finance’, trade finance is a form of funding which is provided against confirmed trade orders. For a growing business, it can provide security needed to keep goods moving.
Trade finance can ensure that all of your suppliers are paid on time and can advance you up to 100% of the confirmed order value, improving your cash flow position. One of the biggest advantages of this is that it improves supplier relationships and leverages bargaining power for an SME.
Designed to bridge the payment and cash flow gap, trade finance may be able to help improve your business dramatically. Find out more about how trade finance works and whether it could be of benefit to you in The Urban List’s article, The Benefits of Trade Finance.
In a very similar way to trade finance, asset finance is a financing option which helps growing businesses to protect their cash flow when needing to purchase new machinery or equipment.
For a growing business, the biggest benefit is being able to use the necessary equipment to keep things in the business moving, without having to pay a large sum of money upfront; leveraging position and growth in the market.
Almost any asset can be financed, the most common being plant machinery, equipment, computers/printers or vehicles. Financing companies will have a minimum asset value of around £5,000 in order to qualify for asset finance. They will offer the following options:
Hire Purchase – spread the cost of payments over a number of years to reduce the strain on your company’s cashflow.
Leasing – pay a monthly fee to lease the asset. At the end of the agreement, the asset will be returned. Due to no ownership, any repairs and maintenance may be included with your lease.
Of course, there are drawbacks related to asset financing. Firstly, you don’t really own the assets, which mean that the equipment is not counted as your company assets; secondly, although you may reduce upfront costs of acquiring equipments, financing an asset means there will be a significant portion in your business’ cash flow that is accounted as hire-purchasing or leasing expenses.
To find out more information about business finance, read Business Finance Explained on the Gov.uk website.
Invoice finance specialists such as Touch Financial have been helping businesses grow through the power of financing, providing a range of options for companies of all sizes.