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NetSol Technologies provides software solutions for asset finance, automotive finance, leasing management, lending, contract origination and activation.
In the aftermath of the 2008 Global Financial Crisis, a number of methods and tools to secure financing for business assets gained significance.
Despite having multiple options available, customers are not fully aware of the types of financing available and which method is best suited to a business’s needs.
One of the most widely used financing tools is asset finance and, in this article, we will explain what is asset finance.
Asset finance is the way a business can pay for ownership of its assets (asset finance) or secure a loan against a presently owned asset (asset refinance).
An asset can be defined as anything that is crucial to the operation of a business, such as vehicles, equipment and even commercial premises. As it is one of the safest and most flexible methods of financing, you can choose how you want to pay for the asset acquired. These payment structures include seasonal payments and balloon payments.
Some of the different types of asset finance are listed below.
This form of financing allows you to purchase an asset by spreading the cost over time. As the asset owner, you have to pay monthly payments to the lender for a set period, and at the end of it, the asset is yours to own forever.
Since you practically “own” the asset, you are responsible for the maintenance and upkeep of the asset and as far as tax payments are concerned, it comes up as an asset on your balance sheet from the start.
You are, however, liable to pay a premium on the amount paid everything and as a result, you end up paying more than the ticket price of the asset.
A form of renting assets for your business as per your business needs. With the method, the lender buys the equipment and you are required to a pay monthly rent for the time you use the equipment. You do not own the asset and the responsibilities are not yours from the time you lease the equipment.
When the lease time has elapsed, you can upgrade to a newer asset (if a new technology is available), send the equipment back to lender or even purchase the asset outright before the lease ends!
This form of financing is great for the short term and is written as an operating cost against your gross profit when calculating your tax.
Finance Lease/Capital Lease
A form of asset financing that is a hybrid between Hire Purchase and Equipment Leasing. You pay to rent the equipment but pay for the majority of your life rather than two or three years and since you don’t technically own the asset, it comes as an operating cost and hence, you can claim the VAT.
Your business’s existing assets can be leveraged to secure finance in order to provide security or relief to your business. Lenders will typically be able to finance up to 80% of the value of the asset but this depends on your negotiation skills and the value of your asset.
Why choose asset finance?
It is useful for funding business growth and you can use your cash to fund other important and immediate needs of your business, maybe some that can be used to drive revenue growth.
Asset Financing Software
NetSol’s NFS Ascent is a leading cloud-based SaaS for Financing, Leasing, Lending, Contract Management and Wholesale Finance.
NFS Ascent is a next-generation platform that provides 360 degree automation of all finance and leasing operations from contract origination to lifecycle management and termination. The asset finance software, NFS Ascent, is capable of handling all asset financing tasks for any volume at any given complexity level. This asset finance software provides a dynamic workflow, agile rule engine and business process manager.
NetSol’s NFS Ascent is a leading asset finance software that is used by a number of household corporate names and several large organisations all over the globe.