Most firms need extra cash at some time or another. They may need extra funds to take them through slack times, whether they are seasonal or caused by a lack of demand. Sadly, for many firms, raising extra funds is becoming increasingly difficult. This is leading to some firms going out of business simply because they cannot get help with cash flow. This is especially sad because using an asset management solution, most firms can actually raise the cash they need. It can help firms to do far more than survive. Extra cash can help a firm to expand.
What is meant by an asset management solution?
An asset management solution to improve cash flow involves borrowing money against a company’s assets. Most companies have heard of borrowing money using property as security, but many do not realise that there are other assets that companies can borrow money against.
What assets can companies borrow against?
Virtually anything that can be sold on can be considered an asset. This includes machinery and plant, raw materials, finished products and property. It is even possible for businesses to use what their customers owe them as collateral for a loan. This is known as invoice financing. If a customer owes a business £1,000, the business can secure a loan against the value of that outstanding invoice.
How much can they borrow?
How much a company can borrow varies. To some extent, it depends on the type of asset being borrowed against.
For invoice finance, it is usually possible to borrow up to 90% of the value of the invoice – in other words, £900 against an invoice of £1,000. If firms want to borrow against their raw materials, the amount they can borrow is less at 30%. For plant and machinery, it is around 80% of the used market value of each item. For property, it is 60%, and for finished products, it is around 50% of its value. That is 50% of the wholesale value of the finished product, not the retail value.
In most cases, a firm having a poor credit rating is not a barrier to borrowing in this way. Firms just need to be able to prove that they are profitable.
Talk to us
We can put together a tailored asset management solution for most firms. At Invoice Finance Scotland, we understand that every firm is different. We have helped firms to borrow up to amounts in the eight figure bracket by borrowing against their assets.