Hond Financial

Posts Tagged ‘asset financiers’

An asset is defined as anything that has the ability to be converted into cash, therefore it remains a standard accounting practice in the United Kingdom that accounts receivable are classified as a debit account, consequently placing them on the left side of the ledger representing assets.

It is a common business practice for companies maintaining relationships with both suppliers and customers that a supplier will often require payment before receivables are settled in full. Consequently, this often results in a business finding themselves short on funds, even though they may have experienced record sales periods. For the individuals that make up the workforce of a business, this may have serious implications. It is important to make sure that they have particular security strategies in place, such as a life insurance policy or critical illness cover.

It is possible that particular financiers of assets will lend money against receivable accounts or invoices. This type of financing is attractive considering that the receivables themselves are security for the loan, and that it provides businesses with an opportunity to grow in proportion to their sales performance, by providing finance that correlates to that performance.

The facility of this particular asset finance is remarkably flexible, and up to 90% of the security may be made available, often in a matter of hours, on the condition of the gross invoices owing.

As businesses often allow 30 or 60 days for payment of accounts, this may well secure repeat business and foster brand loyalty, but when cash is scarce and suppliers need to be paid in order to stay in business, a business can be stifled to the point of stagnation which in the commercial world is the precursor to extinction. The proficient resource allocation is crucial to a business’ health, however when resources are expended on debt collection to the detriment of application to income-generating activity, the result is invariably a reduced productivity which may consequently result in a far greater loss than the cost of factoring finance.

For a business with a sound cash flow and management, a relationship with a factoring finance provider may prove to be mutually beneficial in addition to containing benefits that hold value to the cost structure of any business. For example, the funding provided will normally be for longer than the due date of the receivables and, as a result, surplus funds can be utilized responsibly under a period of grace. In addition, a particular amount of credit will be extended based solely on the established performance of the business, subsequently having useful benefits in company expansion and asset acquisiton.

The most blatant attribute that factoring harbours that other financial products cannot provide, is that there is a financial courtesy that is specifically and precisely related to the underlying security, being the receivables. Alternative types of asset finance normally consider many other borrower features, including the age of the business and the fixed security that can be provided. It is important in business today to personally afford yourself more security, such as life assurance and income-based protection, should the worst happen.