Asset-based lending is generally issued by traditional lenders such as banks and credit unions, and if you have a valuable asset which can be converted into cash, you have a good chance of being approved for such a loan. It will still require that you have good credit and that you can present strong business documentation such as a good balance sheet and profit and loss statements.
Details About Asset-Based Loans
Just as with most types of loans, asset-based lending carries monthly interest rates which are applied, and which you will have to pay along with the principal amount, back to your lender each month. There may also be due diligence fees and audit fees, but still, when all these fees are added together, they are very likely to be lower than with other loan types, simply because you’re securing the loan with an asset.
Whatever asset is used by a company as collateral to secure a business loan, it will be something that the lender can liquidate in order to recover its investment, in the event that you should default on your loan. Many companies tend to use inventory reserves as the asset in question, so a lender will be very careful about approving a loan based on this inventory, ensuring that it can be liquidated and turned into cash.
If buildings or machinery are used in asset-based lending, these must also have solid value on an open market, so they can be turned into cash in the event of loan default. When this happens, your lender will take possession of whatever asset was used as collateral for the loan, and attempt to recover the entire cost of any amount that you defaulted on.
Is asset-based lending right for your small business?
Almost all small businesses will benefit by having more funding since it can be used for business growth or just to maintain positive cash flow. If you are interested in asset-based lending, we’d like to hear from you at OneClick Commercial Funding, so contact us today and we can discuss some options with you.