Non-financial assets

Understanding Non-Financial Assets

When you dive into the world of financial factoring, you'll often hear about non-financial assets. These are assets that a company owns, but they're not in the form of cash or investments. Examples include properties, equipment, and patents. They are valuable because they can be used to produce goods, offer services, or generate revenue in other ways.

Relation to Financial Factoring

In financial factoring, a business sells its invoices to a factor in exchange for immediate cash. This process focuses primarily on financial assets, like receivables. However, the health of a company's non-financial assets can also influence a factor's decision as they indicate the company's long-term potential and operational strength.

Why Non-Financial Assets Matter

Non-financial assets are key to a business's sustainability. They might not be liquid, meaning they can't be quickly turned into cash, but they are essential for ongoing operations. For example, a factory (a non-financial asset) is crucial for a manufacturer to produce goods and earn revenue over time.

Valuation of Non-Financial Assets

Assessing the value of non-financial assets is a complex process. It involves estimating how much they would be worth if sold or how much value they add to the company. This valuation can affect a company's balance sheet and, as a result, may impact the terms offered by a factoring company.