Is your business asset rich but financially poor? If so, you certainly wouldn’t be alone. However, having a high level of assets can prove beneficial when you’re looking for a cash injection.
Here, you’ll discover some of the main finance options available to asset rich businesses.
Secured loans
One of the best options for asset rich businesses to get the funding they need, is to apply for secured business loans. Compared to unsecured loans, the interest rates on these loans are much lower. This is because the finance is secured against your assets. So, if you failed to make the repayments, the lender knows they’ll still get the money they’re owed through your assets. This is why they’re willing to offer reasonably low interest rates.
A secured business loan is typically taken out against a commercial property. However, it can also be secured on other assets provided they amount to a generous sum.
Asset finance
Another option open to you is asset finance. For example, you can either seek asset finance for the purchase of new equipment, or you can loan money against your existing equipment. The same rules apply for any assets you’re wanting to secure finance for.
This type of credit offers a lot of flexibility, with some lenders offering balloon payments and seasonal payment structures. It’s recommended you compare different asset finance options before deciding which one is best for your circumstances.
Sell your assets
If you don’t fancy taking on additional finance, you could choose to sell your assets. You can then take advantage of leasing until you can afford to purchase new equipment. This is often a great option for businesses looking to grow. Sometimes, it helps to let go of assets temporarily, particularly if they’re worth a lot of money.
You could also look into hire purchase agreements. These are useful if you want to sell your existing vehicle. The money used from the sale can be put into the business, and you can get a new car by taking out a hire purchase agreement.
With hire purchase, you spread the cost of the asset over a period of time. Once you reach the end of the agreement, the asset is yours to keep. The only thing to keep in mind with this, is that you could end up paying more than the asset is worth due to the added interest.
These are some of the best options available to businesses which are cash poor but asset rich. Before taking out any form of finance, it’s important to make sure you can comfortably afford the repayments. If not, you could be putting the business into further financial difficulties.