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Is Asset Based Lending for Your Business?
All businesses need capital in some form. If you want to earn money, you need to spend on inventory, advertising, marketing, employees, machinery, and the list goes on.
Ultimately, the right blend of assets and proper management can lead to a very profitable business. The problem is, it’s not all the time that we have the cash to invest. What to do then?
Worry not. An asset based lending loan might be the solution for you.
Why Do You Need a Loan?
Why loan when you can save enough money to fund your business? Wrong. Remember, you are loaning to make money. It’s not a loan for the newest iPhone or a brand-new personal car.
You want to fuel the fire while it’s hot. When your products are selling like hotcakes, you want to purchase more inventory to meet the demand. Or maybe, you want to invest in additional machinery or more working capital for additional employees.
Traditional Loan vs. Asset Based Lending Loan?
What’s the difference between a traditional loan versus an asset-based lending loan? Traditional loans are harder to qualify to, especially if you are a new business. They require stellar financial statements to be approved.
You must prove to them that your business is profitable enough to pay your loan. But what if you don’t have the numbers yet?
That’s where asset-based lending loans come in handy. Collateral like equipment or real estate backs up asset-based lending loans. So, in cases where you can’t pay it, the financial institution is sure to recover the principal loan from your collateral. These are the types of collaterals you can use:
- Real Estate (Personal & Business)
- Working Capital
- Other Fixed Assets
If you are a small and medium enterprise or a business with seasonal products, your cash flow might not be at a high all the time. The advantage of an asset-based lending loan is easily and readily accessible funds right when you need it.
You don’t want to miss growing sales just because you aren’t liquid enough to fund it. Look for financial institutions with a low-interest rate and flexible terms based on your needs.
The amount you can borrow is limited to the value of your collateral. Most asset-based lending loans only grant you a percentage of your asset’s value (percentage depends on the kind of asset).
If your capital requirements are higher, you might not fund your needs entirely. Also, they might be more expensive than traditional loans. But, if the prospect of gain outweighs the cost of the loan, it wouldn’t be a much of a problem.
Who Can Qualify for Asset Based Lending Loans?
- Federally-Recognized Tribes
- For-Profit Business
- Public Bodies
With that, it’s time to push the pedals to increase your business sales! And asset-based lending loans might allow your company’s eventual expansion! It’s time to take advantage of the opportunity with your rapid growth today!