Asset Based Loan

An asset based loan allows you to acquire the funding you need for your small business

. Using some type of collateral like your business equipment or real estate, you will be able to convince a lender to offer you the money you need to expand your working capital or to purchase goods and services. When you use an asset based loan, you will be able to secure a lower interest rate, longer loan terms, and flexible payment plans.

Since an loan is seen as a low risk to the lender, your corporate credit doesnt play as big of a role in the approval process. This type of lending is actually the most commonly used form of financing on the market.

With a business loan you will be able to negotiate the payment terms from 18-36 months. They usually don?t last longer than 3 years as the loans are for short-term cash needs. The money used should immediately help your business and provide you with enough to purchase what you need to expand your business.

When you use unsecured loans, you will end up paying high interest rates like 20% or more. Asset based loans have lower interest rates, usually around 12%. This makes an asset based loan a valuable option for your business.

The biggest difference with an asset loan and an unsecured loan is the risk factor. Lenders have a huge risk with unsecured loans as they are prone to lose the money if you default on the loan. They usually cannot come after your business assets in this event so the risk is off your shoulders. With an asset based loan, the risk is on the borrower. If you default, you will lose the asset you used to secure the loan. If you have put your equipment and machinery on the line, you will lose it. For this reason an asset based loan may be a risk you cannot afford to have.

The loan borrowers usually need this money to expand their business and they face no other method to acquire this money. Practically anyone can apply for an asset based loan and if you have a quality asset to front for the loan, you will gain approval for the loan. The typical customers of an asset base loan include wholesalers, distributors, private entities, retailers, and small businesses. Companies that have negative or cash flow issues often turn to these asset based loans for help.

by: Andy Kyle

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