Asset-based loans involve using the business’s assets to secure loans from lenders. Companies will often consider this option when they need working capital for various needs such as expansion. In an asset-based loan, a lender’s interest is secured by the borrower’s assets.
Who Can Use Asset-Based Loans?
This type of loan is a good idea for a business in need of working capital to keep daily operations ongoing. The business, therefore, chooses to use its assets to get financing from lenders.
Most lenders take accounts receivables as collateral. However, a business can still use its machinery, equipment, inventory, and real estate as business collateral.
What Determines the Amount That a Business Gets?
All businesses cannot get the same amount of financing. Sometimes, a business may also not get the amount it wants because of certain rules and regulations in the lending process. But generally, a business can borrow 75 to 80% of the accounts receivable value. When inventory is used to secure the loan, a company can qualify for about 50% of the inventory’s value.
A lender will first investigate the business before agreeing to provide the loan. That means checking the type of collateral to be used, a business’s financial status, and the financial books.
Advantages of Asset-Based loans
Easy to obtain: Unlike traditional loans that need a lot of documentation, obtaining an asset-based loan is easy as long as your business has met all the lending criteria.
Financial stability: These loans can help a company go through a rough patch. Because the application process is easy, a business can quickly access the financing it needs to get back on its feet.
Easier to get: It is easy to qualify for an asset-based loan compared to other types of financing. The processes involved are very few.
It is flexible: Companies are not restricted to how they can use the loan, unlike other types of loans.
Lack of debt: It is a great way for a business to stay free of debt and keep its borrowing options open.
At Porter Capital Group, we have the solution you need to expand operations. We have made asset-based lending easier by ensuring you can get your loan within a short time and continue operations. Give us a call today, and we will be happy to help with your financial needs.