As a business owner, you would know that obtaining funding can be a challenge. However, there are many options at your disposal. One alternative that many business owners often will turn to would be an asset-based loan. Is this option for you? Here is some extra information:
Understanding an Asset-Based Loan
A handy definition of an asset-based loan is that it is based on the assets of your business. Generally, a lender will advance funds to your business based on 70 to 80 percent of any of your eligible receivables and 50 percent of your completed inventory.
There are many different lenders
For those who are wet behind the ears, there is an immense amount of lenders out there. One way to separate the wheat from the chaff is to simply take a look at the Commercial Finance Association to see which financial institutions perform these loans.
Shop Around (Keep Your Needs in Mind)
Of course, just because there is a tremendous amount of lenders available that offer asset-based loans, that doesn’t necessarily mean that all of them would meet your specific business needs. For example, if you are a small business, you should only consider lenders that will have a wide range of asset-based loans available. A flexible lender really goes a long way to accommodate small businesses. Options such as inventory financing, equipment financing, or a business line of credit are all great options for your small business.
An Ounce of Prevention is Worth a Pound of Cure
Once you have decided on a financial institution, you are more likely to get your loan if you are as organized as possible. Show them their receivables, have a solid reporting system, show them your sold inventory, and show them receipts of your loyal clients paying out their contracts. The main reason for showing all of this paperwork is that it will prove to the lender that you have a solid case for long-term viability.
If you keep all of these factors in mind, you will usually have no problem with securing an asset-based loan for your business.