While looking for business loans, you will come across the term asset finance. It is one of the famous and well-liked funding options that help businesses that need access to funding fast. So, what is the meaning of asset finance? Asset finance is nothing but a lending type for businesses. Businesses that take out an asset finance loan can access soft business assets like office fittings, software, training and hard assets like vehicles, machinery, and equipment. The loan is beneficial for the growth and expansion of the firm as you do need to pay any upfront cost as a borrower. However, the lender takes security over the assets. After borrowing the funds, you need to make smaller regular payments with applicable interest on the outstanding balance.
Asset finance is a beneficial short term business finance as you select an asset, and the finance company or the lender will purchase that and enable you to use it during the lease. After that, you only need to pay the instalments. In the end, when you repay the entire amount with interest, you will get ownership of that asset. Other than this, you can also refinance any equipment loans.
Misconceptions of asset finance loan
With different forms of asset finance, here come several misconceptions. Because of several myths, many people cannot claim asset finance as one of the best short term business finance alternatives.
However, as a borrower, if you learn the facts associated with these myths, you can understand the importance of asset finance. Below we have listed down some misconceptions of asset finance loans with their facts.
Myth:1 Asset finance is for large enterprises
One of the popular myths about asset finance is this. Many people believe that the lenders for business loans in New Zealand or others only grant the loan to large companies. But the fact is any business from an SME and start-up to a large firm can get access to this kind of loan. The lenders only consider the borrower's creditworthiness before approving the loan application. Thus, if you are a small business owner, you can still apply and get funding assistance.
Myth:2 Long and time-consuming approval process
It is a myth as those days were gone when you have to wait for months to get business loans in New Zealand. In today's world, after applying for asset finance, you will get the money quickly. Some lenders process and approve the loan application within 24 hours. Hence, the approval process is not time-consuming.
Myth:3 Asset Finance is suitable for those that cannot pay upfront costs
Again it is a common misconception regarding asset finance. Business owners are taking out this kind of short term business finance to gain access to the asset without paying its upfront cost.
Myth:4 Asset Finance is not affordable
You might come across different loan alternatives, but among those, asset finance is one of the most affordable funding options. This is because you get instant access to the equipment you require and use it immediately. After that, you can pay the installments with applicable affordable interest. So, how is this expensive? Hence, it is another myth that you should overlook.
Myth:5 It requires an adequate trading history to get asset loans
It is untrue, as the lenders or the finance companies make asset funding more accessible for firms that have not been trading for several years. If you do not have a perfect trading history, you can still get access to this kind of loan.
Myth:6 It restricts your purchase
It is another misconception about asset funding, as you can utilize the money to purchase anything, be it equipment and machinery or software and vehicles.
End Takeaway
By reading the above segments, you can more or less understand why more and more business persons are opting for asset finance. Again if you go through the above misconceptions and the truths associated with those, you will understand that asset finance is one of the valuable business loans in New Zealand.