Current Assets and Fixed Assets - Advantages and Example

For any business, assets play a key role in managing and upgrading the company's financial health. These assets are mainly of two types- current assets and fixed assets. Now having a clear understanding of these types is very crucial for your business growth along with stability, liquidity, etc. Read this blog and get to learn about the two major assets- fixed and current, their related benefits, and current assets vs fixed assets.

What Are Current Assets?

A primary type of asset is the current asset. These are short-term assets that can be converted into cash within a year. These assets are important for managing daily business expenses and short-term liabilities which in turn ensures smooth operations. It includes cash, inventory, accounts receivable, and short-term investments. Current asset examples are a company's cash reserves, raw materials, and unpaid customer invoices.

What Are Fixed Assets?

Fixed assets are long-term tangible assets that are majorly used in business operations. You should also know that these are not meant for immediate sale but contribute to revenue generation in the long-run. Fixed assets include machinery, buildings, land, and vehicles. Fixed asset examples are a manufacturing company's production plant and delivery trucks etc.

Fixed Assets vs Current Assets: What's the Difference

Below are the key pointers to understand the current assets vs fixed assets.

Fixed Assets vs Current Assets: Advantages

Importance of Balancing Current and Fixed Assets

• Keep a balance between your current and fixed assets which can help assure that you have financial stability.
• Having a balance between the two assets means your business can meet short-term needs while also planning for long-term growth.
• Balancing the two assets also means that you do not rely solely on one asset type and helps avoid financial risk.

How Current and Fixed Assets Impact Business Loans

Current Assets

Current assets are needed by the lenders to analyse the company's liquidity and ability to repay short-term loans. When you present a strong cash flow and healthy accounts, it can enhance your loan eligibility.

Fixed Assets

Fixed assets serve as collateral for long-term business loans. The value of fixed assets can impact loan approval and interest rates. Owning high-value assets can strengthen financial credibility.

Also Read: What are the different types of Business Loans available in India?

Strategies to Manage Assets for Better Loan Approval

• Managing accurate records of current and fixed assets can help you with faster and better loan approval.
• You can also improve cash flow management by lowering excess current assets.
• Consider investing in high-value fixed assets that may be utilised as collateral.
• Remember to routinely assess asset valuation to promote financial credibility.

What Are The Steps to Apply for a Business Loan on Hero Fincorp?

Getting a Business Loan from Hero FinCorp is very easy and can be done online in minutes. Here is how to apply:-

• Start by going to the Hero FinCorp Business Loan application page on the website.
• Next, provide all of the information requested on the application form, such as company type, income, and loan amount.
• Provide standard papers such as identity verification, business registration, and financial statements.
• Choose the loan amount you require as well as the loan duration that best meets your company demands.
• If you are eligible, you will be given a reference number that can be used to trace your application in real time.
• Our representative will contact you for any further details and verification.
• After verification, you will receive a customised loan offer.

Also Read: Misconceptions About Unsecured Business Loans

Conclusion

As a business owner, it is very important to clearly understand the differences between current and fixed assets. It helps to run the business more accurately and manage daily tasks with confidence. Being aware of these terms can also improve financial liquidity and long-term business stability. Having a balanced asset portfolio can enhance your business over time.

If you are facing any financial drawbacks, then Hero FinCorp is here to grant you Business Loans with minimum paperwork, high loan amounts ranging from Rs 3 Lakh to Rs 40 Lakh, and tenure up to 5 years. Get a loan from us and enjoy competitive Business Loan interest rates.

Frequently Asked Questions

1. Is Goodwill a Fixed Asset?

A goodwill is a fixed intangible asset which implies the company's reputation and brand value.

2. Are fixed assets considered current assets?

No, fixed assets are long-term assets used for business operations, whereas current assets are short-term and liquid.

3. How To Calculate Fixed Assets?

Fixed assets are calculated by adding the purchase cost of tangible assets and subtracting accumulated depreciation.