Asset finance
A source of funding which is secured, or effectively secured, against assets.
The funding can be provided in several ways. Financing may be for example, by way of a secured loan - the security usually being taken over the asset being financed.
It may be by hire purchase - the purchase price and financing costs being paid in instalments over the life of the hire-purchase price with an option to buy at the end by a nominal payment made with the last instalment.
It may be by leasing, the asset being owned by the lessor and made available for use to the lessee who may have an option to purchase the asset at the end of the lease for residual commercial value. A pool of smaller assets - for example motor vehicles or construction plant - may also be financed in these ways.
From the borrower's point of view there is great similarity in effect to asset based finance (ABF) or, from the finance provider's point of view, asset based lending (ABL) - sometimes written as asset-based finance and asset-based lending.
The discussion in the entry on Asset backed finance on the impact on other creditors is relevant here and important to the 'borrower'.
Note.
It is common for lenders and borrowers to use different terms (e.g. 'lending' and 'borrowing') to describe the same transaction from their point of view. Do not be confused by this - though it does make indexing and searching, for example in this Wiki, a little more difficult.
