What is asset financing?

Asset financing is usually used to cover a short-term need for working capital. Some companies prefer to use asset financing in place of traditional financing as the financing is based on the assets themselves rather than the bank's perception of the company's creditworthiness and future business prospects.

How do companies finance assets?

There are two ways to finance assets: The first involves companies using financing to secure the use of assets, including equipment, machinery, property, and other capital assets. A company will be entitled to full use of the asset over a set period of time and will make regular payments to the lender for the use of the asset.

Why should a company use asset financing?

Using asset financing provides a company with the assets they need to operate and grow while maintaining financial flexibility to allocate funds elsewhere. Purchasing assets outright can be expensive, risky, and hold a company back from expansion.