Join millions of Canadians who have already trusted Loans Canada
Apply Now

As a business owner, there are a number of important things you should be familiar with, and the type of assets your company has is one of them. Just about every business requires some forms of assets to operate their business, whether it’s a product that you supply to your clients or items that are needed to carry out business. Your company’s balance sheet will detail the assets on the books. 

More specifically, are your assets short or long-term assets? How quickly do your business’s assets depreciate, if at all? Have these assets been paid in full upfront or have been financed as debt? And how can you use your business assets to secure financing in the future? In this article, we’ll discuss business assets in a little more detail.

What Is A Short-Term Asset? 

A short-term asset is essentially a current asset on the books. More specifically, they are assets that are used up by your company within a 12-month period and likely will not be around after that time frame expires. These types of assets can be easily converted to liquid cash within one fiscal year and are used to carry out daily operations, expenses, and investments. These types of assets can include the following:

Liquid cash in your bank account – Businesses typically use business checking accounts as their main banking source to hold business-related funds that are readily accessible. But savings accounts can be used as well to hold surplus cash. Any cash in these accounts to be used for operating activities, such as covering expenses, can be considered a short-term, or “current,” asset.

Accounts receivables – Any products that are purchased by customers on credit require accounts receivables to keep track of those who pay in this manner rather than in cash or on debit. 

Inventory – Whatever products you currently have in stock to sell to customers are typically considered short-term assets because they will (hopefully) be sold in a relatively short amount of time and will therefore only be on your shelves temporarily.

Learn how to manage small business inventory

What Is A Long-Term Asset? 

Unlike a short-term asset, a long-term asset is one that is typically fixed to your business. Your business will likely be using these assets for longer than 12 months in the production of goods and services that have a lifespan of more than a year. More specifically, your balance sheet will record these types of assets as property, plant, and equipment (PP&E) and can include any of the following:

Land – The land that your business’s headquarters sits on is a fixed asset.

Building – The structure that your business is being carried out in, along with the land it sits on, is also considered a long-term asset. It also includes any improvements that you may have made it the land or building as part of your business operations. 

Vehicles – Any cars, trucks, machinery, or any other type of vehicle owned by your business is considered a fixed asset.

Furniture and fixtures – The furniture, lighting, flooring, appliances, or other fixtures in the building of your business are considered to be fixed assets.

Equipment – Any computers, laptops, telephones, photocopiers, cash registers, or other tools under the equipment category are considered long-term assets if they have been used for more than a year.

Patents – If your business currently has any patents outstanding that you are paying for, these can be considered long-term or fixed assets.

Learn how to control cash flow when you own a seasonal business.

Link Between Assets And Depreciation

Many assets depreciate in value within moments after they are purchased. Fixed assets typically experience some degree of depreciation and can’t be liquidated to cash very easily to meet operational expenses or investments. This accumulated depreciation takes into account your company’s cost for non-current (short-term) assets to expense them over their useful lives. You can then save money by spreading out the cost of purchasing these assets over many years.

Because of their short lifespan, current assets are not depreciated. Instead, only long-term assets can be depreciated, such as land, building, equipment, vehicles or fixtures that have depreciated over time.

How To Use Your Assets As Security For A Loan

In business, it takes money to make money. And oftentimes, a little financial assistance is needed to continue and expand business operations. In this case, a business loan may be needed, whether it’s to acquire a larger commercial space, hire more employees, buy more equipment, or pay for marketing campaigns, among other things. 

If you’re in need of a loan for your business, you’ll need to qualify for one. Luckily, you may be able to use the value of your business’s assets to collateralize the loan that you apply for. The following assets may be used to secure a business loan:

Property – Physical property is perhaps the best type of asset that you can use as collateral for a loan. Whether it’s land, a warehouse, or a storefront owned by your business, these properties are typically very valuable and would make an ideal type of collateral for a loan.

Inventory – Your business’s inventory can also be used to secure a loan.

Equipment – You may collateralize a loan with equipment, such as machinery or vehicles. 

Credit card transactions – If much of the payments made by your clients and vendors are made by credit card transactions, you may be able to use future transactions in exchange for funding. Known as a merchant cash advance this arrangement provides you with a loan, after which you pay back the lender every day via a small percentage of your daily credit card sales.

Final Thoughts

Your business’s assets play a crucial role in the profitability and sustainability of your business. They’re essentially at the core of your company. But they can also be used to secure financing whenever your business may need it.

Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

More From This Author

Special Offers

More From Our Experts

https://loanscanada.ca/wp-content/uploads/2023/06/Fido-Refer-A-Friend.png
Fido Refer-A-Friend Program

By Lisa Rennie
Published on June 1, 2023

The Fido Refer-A-Friend program is unique. You can earn up to 5 free months of Fido cell service EVERY year. That is almost 50% off your bill.

https://loanscanada.ca/wp-content/uploads/2023/06/Assessed-value-vs.-market-value.png
Assessed Value vs. Market Value: How Does It Affect Your Home Equity?

By Mortgage Maestro

How do assessed value and market value differ? Find out how your market value and assessed value affects your home equity?

https://loanscanada.ca/wp-content/uploads/2019/11/Home-equity-loan-canada.png
How To Borrow Using Your Home Equity In 2023

By Lisa Rennie

Do you have equity in your home? Find out how you can get a home equity loan in Canada and how much you can borrow.

https://loanscanada.ca/wp-content/uploads/2023/05/Keepa-Review.png
Keepa – Amazon Price Tracker

By Bryan Daly

If you want to shop or sell on Amazon, you need to know about Keepa. Keepa is a browser extension that tracks Amazon prices and

https://loanscanada.ca/wp-content/uploads/2023/05/Used-car-loans.png
Should You Get a Loan for a Used Car?

By Bryan Daly

Used cars loan can help you purchase a car even if you can’t pay it outright. The question is, should you get a loan for a used car?

https://loanscanada.ca/wp-content/uploads/2021/12/Best-Credit-Cards-For-Low-Income-Earners.png
Best Credit Cards For Low Income Earners 2023

By Lisa Rennie

If you're worried about qualifying for a credit card because you have a low income, check out these credit cards for low income requirements and great...

https://loanscanada.ca/wp-content/uploads/2023/05/Credit-memo-canada-.png
Why Did You Recieve A Credit Memo In Canada?

By Bryan Daly

Have you ever received a credit memo in Canada? Wondering why you got it? If you’ve ever returned a product, you may receive a credit memo instead of ...

https://loanscanada.ca/wp-content/uploads/2020/04/Personal-Loan-Alternatives-.png
What Do You Need To Borrow Money In Canada?

By Lisa Rennie

When you need to borrow money, there are many options to choose from. But finding the right option can be hard. Let's find out which one is right for ...

Recognized As One Of Canada's Top Growing Companies

Loans Canada, the country's original loan comparison platform, is proud to be recognized as one of Canada's fastest growing companies by The Globe and Mail!

Read More

Why choose Loans Canada?

Apply Once &
Get Multiple Offers
Save Time
And Money
Get Your Free
Credit Score
Free
Service
Expert Tips
And Advice
Exclusive
Offers

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.

Koho Prepaid Credit Card