No matter the type of business you own, you will need cash and working capital, to operate, grow, and expand. Once in a while, it is common for most businesses to have a financial crunch. When traditional loans and financing are not an option, asset-based loans can be handy. Lenders like Accord Financial asset lending work with small and growing businesses alike, to offer them a loan when they the most, without the conventional delays associated with banks and other financial institutions. In this post, we take a look at the various facts related to asset-based loans.
- For the unversed, asset-based loan is a form of financing, where the balance sheet assets of a company work as collateral for the loan. Common assets that are used for such loans include account receivables, machinery, stock, and equipment.
- Getting approved for asset-based loans is rather easy, given that the lender has a collateral to rely on. However, some lenders may be interested in the financial performance of your company in general.
- Credit score is not always a hard factor for getting an asset-based loan. Average rating works just fine, because the assets work as a security for the lender, in case your company doesn’t manage to repay the loan.
- Because of the nature of such loans, the interest rate can be higher than usual. Interest rates may vary between lenders, depending on the amount borrowed, level of risk, and performance of your business.
- This is a secured loan, and therefore, if your company doesn’t repay the loan, there is a chance of losing your valuable assets. In other words, being responsible with asset-based loans is extremely important.
- With asset-based loans, the money can be used for almost anything. You can use the loan amount of restructuring your business, for mergers & acquisitions, to buy new stock and so on. Lenders are usually not interested in knowing the in-depth needs of your business.
- Most lenders will work with appraisers to determine the value of your assets. That determines if the amount asked for, will be approved. You can get a certain percentage of the asset amount through the asset-based loan.
Now that you have figured out the basics, review the pros and cons in depth, find a reliable lending service and read the terms & conditions, before applying for asset-based loans. Used for right reasons, this could resolve your cash flow problems.
