4 Facts About Asset-Based Lending that You Need To Know

If you’re a proud owner of a business, you’ll need to know how to secure funding for your company. It can be a struggle to maintain a healthy cash flow when you’re trying to expand your business or when you’re hiring more employees. When cash flow troubles start to keep you awake at night, you need to find access to some capital in order to cover the cost of your company’s operation or expansion. Failing to look into possible solutions that are made available to you will cause damage to your business. One of these solutions is asset-based lending.

What Is Asset-Based Lending?

This financing option is one of the most popular choices among small business owners for years now. It takes place when the borrower makes a decision to put up an asset or assets to serve as collateral in order to secure a loan. In case you’re wondering, these assets could be the equipment you have for your business, your inventory, your balance-sheet assets, and your accounts receivable. If the borrower fails to make payments for the loan, the lender takes ownership of all of the assets that were put up by the borrower. Furthermore, the lender also has the option to sell these assets off in order to recover the loss.

Whether your business growing or struggling to keep its doors open, you’re going to have better chances of achieving your business goals if you go for this financing alternative. If you don’t know much about asset-based lending, check out these facts:

1. Asset-Based Lending Is A Viable Alternative

Is your business relatively new? Do you have a history of low credit? If so, it will be more difficult for you to obtain unsecured loans because the approval of traditional financial institutions is often dependent upon your credit history or the number of years that your company has experienced stable financial operations. What makes asset-based lending a viable solution is that it allows you to make use of the assets that have already been associated with your company. In other words, you won’t have to satisfy the stringent requirements that involve credit history, the number of years in business, etc. in order to generate the funding that’s needed to keep your company running smoothly.

2. Asset-Based Lending Is Very Affordable

When it comes to affordability, asset-based financing is about as affordable as a conventional loan would be. To prove this point, countless businesses that are trying their best to secure funding decide to make use of their invoices as assets. Only a small fee is charged in the process. In most cases, this amount is even much less than the regular amount that businesses pay for bank loan interest. What’s more, unlike the interest rate that’s applied to a particular bank loan which occurs throughout the entire life of the loan, only a one-time fee is charged for accounts receivable financing.

3. Asset-Based Lending Is Extremely Flexible

In most cases, traditional financing institutions such as banks often set many restrictions to the borrower in terms of how they can use the money. Unless you present a clear business purpose, you won’t be able to secure your much-needed funding. On the other hand, alternative lenders aren’t stringent about how you might want to spend the loan money that you get from an asset-based loan. This means that you can use the money to address any type of financial problem that your company has.

4. Asset-Based Lending Is Very Secure

It’s not surprising to know that more and more companies prefer to choose asset-based financing over conventional loans. One of the reasons why they do so is the fact that it poses no risk to their payment history, as well as their credit history. Since the availability of their funding is solely based on the value of their collateral, they feel that this financing option is much more secure. On the other hand, unsecured loans can cause considerable damage to your business once your loan is considered to be in default. In the absence of collateral that’s associated with the loan terms, the lenders have no other choice but to pursue all means that’s necessary in order to recover the money that was lost in the loan.

Consider Applying for Asset-Based Lending Today!

Does your business have a shaky credit history? Do you have a loan application that’s nothing short of non-stellar? Perhaps you should think about putting up collateral to get the funding your business desperately needs.