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Are you looking for capital to grow your business or invest? Many lenders provide money for specific types of assets you own. This is called asset-based lending.
Bank loans require businesses to show robust cash flow. To prove they can manage their monthly payments. They recognize the value of businesses’ assets and will loan funds against them.
Not sure if this is the correct type of loan for you? Here’s everything you need to know about it!
Introduction to Asset-Based Lending
Asset-based lending is a type of business financing secured by a debtor’s tangible assets. Businesses usually use this when they have difficulty meeting their short-term working capital.
Asset-based lending takes into consideration the financial position of the borrower. They also can make loan payments. The lender evaluates the value of the assets and then lends a percentage of that value.
The borrower is responsible for repaying the principal amount plus interest and fees. Some offer a unique line of financing just for equipment financing program for businesses.
Types of Assets Accepted
Asset-based lenders accept a wide range of assets as collateral, including:
- Accounts receivable
- Inventory
- Real estate
- Machinery
- Equipment
Asset-based lending can provide businesses with enough capital to purchase new equipment, expand operations, cover seasonal demand spikes, and bridge cash gaps.
The value of the assets accepted by asset-based lenders varies significantly, depending on their age, condition, and functionality, making it an ideal form of financing for businesses in need of capital quickly.
How to Access
To access asset-based lending, businesses must provide financial documents to the lender, such as financial statements, conduct a current inventory of assets, and provide proof of asset ownership.
The lender will assess the value of the assets to determine the amount of capital they can issue. Strict repayment terms must be adhered to maintain the loan. To ensure loan qualification, the borrower should have a well-established business, past solid performance, and a strong capital base.
The Benefits
The benefits of asset-based lending include quicker and easier access to capital, flexible repayment plans, and the potential to unlock the potential of existing assets. It also gives businesses an extra layer of protection from potential changes in the market, enabling them to ride out market volatility.
Asset-based lending can increase capital to help businesses reach their goals faster and allow owners to determine how the capital will be used. Additionally, asset-based lending can remove the risk of defaulting on the loan since the lender retains ownership of the collateral until repaid.
Success Stories
Asset-based lending is an excellent solution for businesses looking for additional financing. It helps businesses access capital when traditional finance options are insufficient or too expensive.
With lower rates and flexible repayment terms, asset-based lending can help business owners manage cash flow and may even open new business opportunities. Talk to a trusted lender today to see if asset-based lending is the right option.
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