When you have a stable business with numerous assets, you could be sitting on a relatively easy source of funding without knowing it!
Asset-based loans make getting access to the capital you need possible for business owners with all credit types.
Understanding Asset Based Loans
Standard loans can require good credit, a long-established business, and months of paperwork and preparation. An asset-based loan allows you to leverage your physical assets, accounts receivable, and even inventory to secure the cash you need for cash flow issues, sudden growth, or other immediate situations.
Methods for asset-based lending can include financing based on the value of your equipment or inventory, or done via invoice factoring.
Invoice factoring refers to “selling” you unpaid invoices to a third party who then collects on them. You’ll receive a percentage of the unpaid invoices upfront as your asset-based loan. The financing company will then collect and keep the full amount to pay for their services.
Exploring the Advantages of Asset Based Loans
The biggest advantages of asset-based lending are the ease of the process, and the quick access to cash when you need it the most.
Normal lending practices often adhere to strict bank requirements. Not every business owner has a great credit score, especially those just starting out. So, when they need to increase their cash flow, they can face lots of red tape and long wait periods. Credit can also limit the amount you’re qualified for, which can present additional roadblocks.
Asset-based lending eliminates much of this hassle and provides an easy and surefire way to get access to a larger amount of capital.
What are the Costs Associated with Asset Based Lending?
There are definite downsides to asset-based lending, including the risk of losing your assets and higher financing costs. All financing options should be carefully considered and weighed against the potential risks before committing!
For more information, reach out to Topfund Capital today.