Soft asset finance: What you need to know

When it comes to financing your business, it’s important to understand the concept of soft assets.

What is classed as a soft asset?

Soft assets refer to intangible or non-physical assets that hold significant value for businesses. These assets can include intellectual property, software, licenses, trademarks, patents, and even specific types of equipment, such as commercial ovens used in the catering sector.

Difference between a hard and a soft asset

It’s crucial to differentiate between soft and hard assets. Unlike soft assets, hard assets are tangible and physical items that have intrinsic value, and maintain their value more than a soft asset. Hard assets typically include vehicles (cars, trucks, buses and coaches, and agricultural machines such as tractors), industrial machinery, plant equipment (yellow metal), and engineering equipment. Assets that are outside of this range will fall under the soft asset category.

The primary distinction lies in the nature of these assets. Soft assets, being intangible, can be challenging to value accurately. Traditional lenders often hesitate to provide financing for soft assets due to the absence of physical collateral. This is where soft asset finance comes into play, offering tailored funding solutions that address the unique characteristics of intangible assets.

What are the benefits of financing soft assets?

Financing soft assets offers several advantages for businesses that heavily rely on intangible assets. Consider the following benefits:

Preserving cash flow: Soft asset financing allows businesses to preserve their cash flow by spreading the cost of acquiring or developing intangible assets over time. This ensures that capital remains available for other crucial operational expenses or growth initiatives.

Flexible repayment terms: Soft asset finance typically provides more flexibility in repayment terms compared to traditional business loans. Lenders structure the financing to align with the income streams generated by the soft assets, ensuring a manageable repayment schedule.

Expertise in soft asset evaluation: Soft asset financiers possess expertise in evaluating and understanding the value of intangible assets. Their specialised knowledge proves invaluable when assessing the worth of your soft assets and structuring the financing accordingly.

Facilitating growth and innovation: Soft asset finance enables businesses to invest in research and development, innovation, or acquiring new intellectual property. This fosters growth and helps stay ahead of competitors in today’s fast-paced business landscape.

Unlocking hidden value: Financing soft assets can unlock the value that might be otherwise tied up in your business. By using the assets as collateral or leveraging their potential revenue streams, you can access funding opportunities that may have been previously unavailable.

How to finance soft assets?

When it comes to financing your soft assets, various options are available. Here are a few common approaches:

Soft asset hire purchase: These are specific loan products designed to fund intangible assets. Soft asset finance offers flexible terms, allowing you to finance the acquisition, development, or protection of your intellectual property or software.

Revenue-based financing: This alternative financing option provides capital based on a percentage of your company’s revenue. Revenue-based financing is particularly suitable for businesses that generate income from soft assets, as it aligns the repayment schedule with your cash flow.

Asset-based lending: If you have tangible assets in addition to soft assets, asset-based lending allows you to use these combined assets as collateral for securing financing. This provides more security for lenders and potentially lowers your borrowing costs.

Equity financing: In certain cases, businesses opt for equity financing, where investors provide capital in exchange for a stake in the company. This can be a suitable option for startups or businesses with high growth potential.

Get started with Swoop

When it comes to exploring soft asset financing options, we’re here to assist you. As a leading financial marketplace, we connect businesses with a wide network of lenders offering specialised soft asset finance solutions. Register with us today and get started.