Everything To Know About Asset-Based Lending
As a business owner, especially when first starting, you may find that the money isn’t always there when you need it. There seem to be highs and lows when it comes to the cash flow, and if you can’t get a handle on it, you may find yourself facing big problems down the road. If you hit a wall and need some cash to get you over it, you may want to look into asset-based lending. This practice is common among companies that need a bit of emergency funding to get through the leaner times.
Asset-Based Lending Is a Temporary Fix
Depending on the situation, you may need a short-term solution, or your problem may be, and you need a far-reaching fix. If you are expecting cash to start pouring in sometime soon, then asset-based lending is the better route. However, if you need capital for issues that may continue to crop up, you may want to look at other options that offer more traditional funding options.
You Need Collateral To Qualify
There are secured debts like loans and unsecured, like credit cards. Asset-based loans are secure and use your accounts receivables and even inventory as collateral for the money you need. This means if you are unable to fulfill your end of the agreement, then the finance company will seize these things to recoup the money they’re out.
You Have Options
You don’t have to feel cornered and stuck with one or two financing companies. There are many banks and other lenders that engage in asset-based lending. This is good news for you as it gives you options. On the other hand, if one company turns you down, you may try applying somewhere else. One thing is not to give up and ask why you were rejected. Many times, newer businesses get turned down since they are more of a liability and don’t usually have much to show in the way of profits and inventory.
The Rates Are Higher
An asset-based loan may wind up costing you more money, just because of the higher fees and rates. Some of this is because lenders who engage in this practice do so with some riskier prospects. It may also be due to your newness in the marketplace and how bankable a financing company feels you are.
Asset-based lending is a great way to combat the occasional stall between money in and out. If you find your business needs an infusion of funds, give this secure method of debt a try.