The Advantages Of Asset Backed Lending

Asset backed lending is a way for an individual or a company to obtain a monetary loan by placing collateral on the table

. If the loan is not repaid, the ownership of the collateral is turned over to the lender. For example, imagine that Petey's Pizza needs to borrow $4,000 from Layman's Loans in order to construct an additional dining area in the pizza shop. Layman's Loans asks, "How do we know you will repay us? What do you have to offer if you are unable to come up with the money on time?" Petey's Pizza replies, "If I do not repay you within one year, you will be given ownership of my two deluxe pizza ovens which together are worth $10,000." Layman's Loans and Petey's Pizza sign an agreement stating that both parties agree to these terms and are legally bound to them.

If a party is thinking of entering into such an agreement, that party should research both the disadvantages and the advantages of asset based lending. One big factor that might persuade someone to utilize this type of deal is a state of having much property but little cash. Imagine that a company has recently spent a large portion of money to purchase new inventory and equipment. However, more money is still needed in order to expedite the intended growth of the company. That company may be likely to seek this type of advance.

Another prime reason that a party might seek to utilize this type of lending deal is if that party has not established good credit. Whether it is because the company or individual has not been in business for very long or because of a poor financial record, asset backed loans are easier to obtain than those from a bank. This is because the lender has a guarantee that they will be able to repay themselves if the borrower does not follow the agreement.

It is not strictly on the borrower's side that there are benefits to asset backed loans. A lender can make significant profits organizing this type of deal. Interest rates are determined by the lender, so the lending party is able to decide how much money they will make from each agreement they make.

The advantages of asset backed lending are plentiful for everyone that is involved. Many businesses thrive solely upon this type of lending. Also, if a company desperately needs money that company can easily use their property as collateral to obtain fast cash.

by: Alex Gray

POST COMMENT

What are the Advantages of Colocation? Three Advantages Of Hiring An Invoice Factoring Company Organic Skincare Ingredients And Advantages The Advantages Of Plastic Collar Stays And Metal Collar Stays Roach Extermination Experts and the Advantages of Hiring Them Dental Implants Los Angeles Come With Numerous Great Advantages Advantages Of Spread Betting In The United Kingdom Organic Advantages Of Mineral Makeup Expanding Foam Uses and Advantages Advantages Of Using A Pre Launch Mlm The Advantages Of Hiring Older Employees The Advantages of Fiber Optic Cable Advantages Of Autism Awareness