Asset-based loans are just what they sound like – loans that are based on your business assets such as inventory or accounts receivable. These would be used as collateral for receiving the sum of money you need currently. In effect, your future revenue is offered in exchange for access to immediate cash. Lenders involved with asset-based loans will typically advance funding which is set at some agreed-upon percentage of the fair market value of your assets, usually around 70% or 80% for accounts receivable, and closer to 50% when finished inventory is the asset.
Acquiring an asset-based loan
As you might expect, there are a great many financial services in this country that offer asset-based loans, because they are much less risky for a lender than unsecured loans would be. This means that if your company has commonly sold inventory, detailed financial statements, generally good reporting, and well-paying customers, your chances of being approved for an asset-based loan are good. If you can bring detailed and accurate information to a lender, and show that your business is a viable one, you probably won’t have much difficulty securing an asset-based loan.
Uses for an Asset-Based Loan
There are hundreds of uses for an asset-based loan, as any small business owner can tell you. It might just be that an infusion of cash is needed to overcome some financial hurdle at the moment or to avoid the possibility of stalled business growth. Your business might also be in the midst of some kind of turnaround, or it could be under-funded temporarily.
If you are undergoing a period of rapid growth, this generally calls for a quick infusion of cash to take advantage of opportunities that may only exist for a short period. Whatever the reason, acquiring an asset-based loan can be a very desirable solution to a business problem or issue and can make all the difference for your company in remaining competitive and successful.
Interested in an Asset-Based Loan?
If your small business is looking for an asset-based loan, we may be able to help you. Contact us at Porter Capital Group, so we can discuss some lending options you may be eligible for.