Both asset based finance and cash flow finance are important sources of funding for a business for its short term(working capital) and long term(capital assets) sustainability.
Asset-based finance is a source of funding that is secured by a company’s assets.
This article looks at what is asset based finance and see the difference between the more traditional source of finance namely cash flow loan or finance.
Asset based finance:Accounts Receivables,Inventory,etc
Some features of asset-based finance include:
- Lender generally has the right to seize the borrower’s asset(s) in the event that the commitments under the loan agreement is unfulfilled;
- Normally referring to the financing by a borrower’s account receivable through factoring or invoice discounting facilities;
- However it also includes many more assets like inventory, equipment, plant and machinery, real estates, etc which can also be used to arrange asset-based loans on a revolving or term basis; Continue reading What Is Meant by Asset-based Finance? What Are some of the differences between Asset-based finance and Cash Flow-based Loans/Finance
FCCA,CA(MIA)with more than 26 years of post-qualifying working experiences. Previous working stints with one of the big accounting four, Regional GFC & Group Treasurer in a group of Malaysian and Group CFO in Singapore public listed concern.
Also author to another very popular free educational accounting cum finance blog: http://basiccollegeaccounting.com under the branding of College Accounting Coach.
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