cheap money and expensive money

24 April 2008

TYPE OF ASSET CHEAP OR EXPENSIVE MONEY – WHAT % OF VALUE WILL THEY FINANCE GUIDELINE / BUDGET PRICING
Rental fleet – items with serial numbers Cheap money – up to 80% of forced sale value 1.5% to 8% over cost of funds
Rental fleet Expensive money only
– items not easily identifiable
– i.e. scaffolding, hand tools
Consumables Expensive money only
Debtor book Cheap money – up to 85% of debts including vat (excluding past – due) (via factoring or invoice discounting) 1.5% to 3.5% over cost of funds
Real estate Cheap money – up to 80% of appraised value 1.5% to 3.5% over cost of funds
Transport vehicles/cars Cheap money – up to 80% of wholesale/auction value 1.5% to 8% over cost of funds
Office equipment/software Cheap money – only if it’s new or nearly new 2% to 6% over cost of funds
Brand name and trademarks Expensive money only
Know how and working practices
Phone numbers
Ongoing rental agreements
Forward order book
Goodwill and/or cash generation capability
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