There are many ways to fund a new or existing business. You can rely on your own money and bootstrap the startup to a certain point in its development. You can also count on investors and the crowd for funding, especially when you have a good business idea or product prototype.
Another funding option to consider is a business loan. There are more types of business loans on the market, each with its own advantages and use cases, than ever before. In this article, we are going to focus on asset-based loans and how your business can benefit from this type of financing. Let’s have a look, shall we?
As with other secured loans, asset-based loans are very affordable. You pay less interest and other fees in exchange for using a business asset as collateral. The asset-based loan amount is determined by the value of the asset you put as collateral. With some lenders, you can get up to 95% of the asset valuation under certain circumstances.
Asset-based loans are also very flexible in terms of the loan term. You can extend the loan to up to five years to make the monthly repayment amount more affordable. On the other hand, the same type of loan is suitable for short-term use, but this usually depends on the lender you work with and how you negotiate the loan agreement.
It Is Secured
Conventional business loans are usually based on the cash flow of the business. Lenders will take a close look at how you operate your business as well as the plans you have for developing (and operating) your business. The health of your business’ finance and the business plan you propose will determine if you quality for the loan.
Unfortunately, not all businesses have healthy cash flow. For new startups, for instance, having and maintaining a healthy cash flow isn’t always possible. This is where a business loan based on assets comes in handy.
Rather than reviewing the state of your business, the lender will only look into the assets you place as collateral. If the asset is valuable enough for the loan and the amount is suitable based on that valuation, you will get the loan rather easily. There are even loans that accept multiple business assets as collateral.
It’s More Flexible Than You Think
That brings us to the third positive about asset-based loans: they are more flexible than you think. You can, for example, use equipment, inventory, and other assets that are registered in the business balance sheets as collateral. The only constraint is in the valuation of those assets; the lender will independently valuate your collaterals before deciding whether to finance you.
The rest of the loan agreement is equally flexible. You can even get matched with lenders that really suit your type of business to boost your chances of getting the financing you need with the help of tools like the popular LendingExpress. This site has a comprehensive database of potential lenders for you to benefit from.
These facts make asset-based loans an appealing option for funding your business. The next time you need a new financing source for operations and other necessities, look into secured business loans!