Companies that use heavy equipment in their everyday operations are often searching for ways to save on their equipment purchases. One of the available options for affording new equipment is called asset based heavy equipment financing. Unlike traditional bank financing, this type of financing doesn't require exceptional credit which makes it an ideal consideration for companies that haven't been in business a long time or those whose owners have unsatisfactory credit.
What is Asset Based Financing?
Asset based financing works by allowing company owners to use the value of their existing assets as collateral for a loan. By doing so, these entrepreneurs don't have to worry about qualifying for traditional lending or having to pass a rigorous credit check. After ascertaining the current value of their assets company owners can use the total value as a credit line on which they can finance new equipment. Assets that may qualify as the basis for collateral include accounts receivable and inventory.
Obtaining Asset Based Financing
While some companies may use asset based financing to purchase new equipment for use others might choose to take advantage of other financing options. These include refinancing, leasing and debt restructuring. Applying for these methods of financing is generally simple, requiring only a completed application and documents supporting the value of your collateral assets.
Generally, you'll want to work with a financing company that is experienced in handling the specific type of equipment you're interested in getting. It's also important to make sure that the terms and conditions of the loan are clear. Some institutions may add charges into their contracts that can cause the financing rates to be considerably higher than those agreed upon originally.
How Asset Based Financing Can Benefit Your Business
One of the main advantages of asset based heavy equipment financing is the flexibility it affords company owners. Since the line of credit involved is revolving it can be used to borrow funds as needed for new equipment and then paid off and reused for a new acquisition later. Another benefit of this type of financing is the variety of purchase options. Depending on the lender, companies can use the value of their assets to get business cash advances, financing for mergers and acquisitions and even debt restructuring.
Asset based heavy equipment financing is an ideal way for small or developing companies to gain access to the lending they need to obtain new or leased equipment for their businesses.