What is Asset Based Finance in Pietermaritzburg?

Asset-Based Short Term Lending in Pietermaritzburg

What is Asset Based Finance?

Asset based finance or asset backed is a form of financing where individuals or businesses use their assets as collateral to secure a loan or line of credit.

It allows them to unlock the value of their assets to obtain funding for various purposes.

For businesses, asset finance involves using assets like accounts receivable, inventory, equipment, or property as collateral to access funds. It helps businesses acquire necessary assets, manage cash flow, and support growth without making large upfront payments.

For individuals, asset finance can take the form of secured loans, where assets like property or vehicles are used as collateral. This allows individuals to borrow money while leveraging the value of their assets.

How does Asset Based Finance work?

In asset based finance, the borrower pledges specific assets as collateral. These assets serve as security for the lender in case the borrower defaults on the loan. The assets used as collateral can vary depending on the nature of the business. Common types of assets include accounts receivable (unpaid customer invoices), inventory, machinery and equipment, real estate, and sometimes even intellectual property. The amount a business can borrow through asset based finance is typically based on a percentage of the appraised value of the pledged assets. Lenders may advance funds up to a certain percentage, often around 70-90%, of the asset's value.

Asset based finance is commonly used to address working capital needs, such as managing cash flow, purchasing inventory, financing expansion plans, or funding day-to-day operations. It can be particularly beneficial for companies with seasonal sales fluctuations or those experiencing rapid growth. For individuals funding may be required for major expenses, such as home renovations or education.

Lenders assess the quality and value of the assets being used as collateral through a process called due diligence. This involves evaluating the creditworthiness of the business or individual, conducting appraisals, verifying the existence and collectability of accounts receivable, and analysing the overall risk profile.

Asset based finance often takes the form of a revolving line of credit, which means the borrower can draw and repay funds within a predetermined limit over a specific period. This flexibility allows businesses to access funds as needed and manage their cash flow effectively.

The interest rates for asset-based finance are typically higher than traditional bank loans due to the increased risk associated with collateral-based lending. Lenders may also charge fees, such as origination fees, appraisal fees, or unused line fees.

Asset finance provides flexibility, preserves cash flow, and allows individuals or businesses to access funding based on the value of their assets. It can be a viable alternative to traditional loans, offering benefits such as improved cash flow, access to essential assets, and diversification of funding sources.

TWH Consulting offers asset based finance in Pietermaritzburg and invites you to apply by clicking here.

We service the whole of South Africa from our head office in Cape Town and branches across South Africa.

CAPE TOWN PRETORIA BLOEMFONTEIN JOHANNESBURG EAST LONDON DURBAN Port Elizabeth Gqeberha KEMPTON PARK POLOKWANE NELSPRUIT GEORGE RUSTENBURG GERMISTON VEREENIGING BELLVILLE KIMBERLEY KLERKSDORP VANDERBIJLPARK PAARL SOMERSET WEST LOUIS TRICHARDT Pietermaritzburg Centurion