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What are the different forms of asset finance?

For a company that wants to raise money quickly, asset finance is a great option. Most companies have assets in some form or other that can be used as security for a loan. Here are the forms of asset financing that we offer, with a brief explanation of each of them.

Invoice discounting

Invoice discounting is a great way to borrow money. When a customer invoice is raised, it is possible to borrow up to 85% of the value of that invoice. Once the customer pays the invoice, the loan and any fees are paid off and the balance is put into the borrower’s account. The responsibility for making sure that the invoice is paid lies with the borrower, so its customers need never know that a firm is borrowing money.

Invoice factoring

Invoice factoring is very similar to invoice discounting. The main difference is that credit control becomes the lender’s responsibility, so the customer pays us rather than you. We deduct the amount borrowed and our fees and pay you the balance. With this kind of borrowing, it is possible to borrow up to 90% of the value of an invoice.

Raw materials

A firm can borrow up to 30% of the current market value of any raw materials. It is up to the firm borrowing the money to determine what percentage of its raw products it borrows against.

Finished products

Any finished product can also be used as collateral for a loan, with financing up to the value of 50% of that product’s market value. A firm can borrow against a small percentage of its finished products, or all of it.

Property

Any collateral in a property can act as security for a loan. Typically, a firm can borrow up to 60% of the value of its property. Importantly, the company retains the right to use the property as normal.

Machinery and plant

It is possible to borrow up to 80% of the market value of any plant and machinery that a company owns outright. The company can continue to use its machinery and plant as normal, which means that production can continue as normal.

Trade finance

Occasionally, it is even possible to borrow money on the strength of a large order. This is an unusual asset finance product and decisions on whether it is possible and how much can be lent is done on a case-by-case basis, but it is an option that is well worth bearing in mind.

Supplier finance

Sometimes, it can be difficult for a firm with a small working capital to purchase raw materials. In this situation, it is sometimes possible to find investors who will lend a firm the money it needs, even in the absence of customer orders.

The most popular and widely used asset finance solution is invoice discounting but, as you can see, we offer a range of ways for a firm to use their existing assets to generate the extra cash their business needs. If your company needs money to get through a slow time or to buy the raw materials or space you need to take advantage of a business opportunity, speak to us at Invoice Finance Scotland. We have helped thousands of firms in the past and look forward to doing the same for you.

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NACFB - Helping Fund UK Businesses  Federation of Small Business