Many business owners find themselves in the position of requiring additional funding so that they can take advantage of growth opportunities. Asset-based lending offers the option of obtaining financing that is not dependent on high credit scores but instead backed by a form of collateral. Here is some information on how asset-based lending can provide the funding you need to take your business to the next level.
The Basics of Asset-Based Lending
Asset-based lending involves companies putting up assets as collateral; in exchange, lenders offer a certain percentage of the value of the assets as a loan. Common examples of asset-based loans are home mortgages and commercial mortgages, which allow borrowers to purchase real estate using the properties as collateral. Asset-based loans can sometimes be set up as revolving credit, especially when the assets involved are outstanding accounts receivables, which can be used as collateral on an ongoing basis.
Assets Suitable for Collateral
As mentioned above, real estate is often used as collateral for loans to purchase the property. If your business needs equipment, you can use equipment financing to obtain loans to purchase what you need, and the equipment becomes the collateral for the loans. Similarly, it is also possible to acquire inventory using the inventory you purchase as collateral. Invoice factoring allows you to obtain loans based on the value of your outstanding accounts receivable.
The Advantages of Asset-Based Lending
Asset-based loans have numerous benefits. For instance, you can obtain funding relatively quickly, rather than going through the long, drawn-out process of getting a traditional term loan from a credit union or bank. Since approval is based on the value of the collateral you offer, you can acquire financing even if your credit score is poor. As long as your business has properly documented financial statements, a history of on-time bill payments, and valuable collateral, you should be able to qualify for an asset-based loan quickly and easily.
For more advice on asset-based lending, get in touch with 18 Sierra Financial.