ASSET AND CASHFLOW FUNDING

Asset and cash flow funding are two different types of financing approaches that businesses use to meet their financial needs and support their operations.

Asset Funding

Asset funding, also known as asset-based financing, involves using a company's assets as collateral to secure a loan or line of credit with a lender.

Assets can include physical assets (such as machinery, equipment, inventory) or financial assets (such as accounts receivable). For example, some businesses get Asset-Based Lending (ABL) which is where they use the businesses assets, like assets, accounts receivable or inventory, as collateral to obtain a loan. The amount that can be borrowed is often based on the value of the collateral.

Businesses also can apply for equipment financing where a company may secure financing specifically to purchase new equipment, and the equipment itself serves as collateral for the loan.

Cash Flow Funding

Cash flow funding is a financing approach where a business relies on its expected cash inflows, typically generated by its operations, to meet its financial obligations and fund day-to-day activities.

Examples of Cash flow funding include:

• Working Capital Loans where the loan is designed to cover a company's short-term operational needs, such as paying suppliers and meeting payroll. The loan is repaid using the company's future cash flows.

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