If you have been trying to get a business loan and have felt discouraged by the results so far, you might wish to consider asset-based lending. With this type of alternative lending, the item you are purchasing or leasing acts as collateral. That means the lender can repossess it if you don’t keep up with the agreed-upon payment schedule. You would lose payments you made against the equipment in that situation as well.
The collateral used for asset-based lending can also be something that your company already owns. The more valuable the asset and the better condition you keep it in, the more likely it is the lender will approve your request for an asset-based loan. These applications are often shorter and simpler than the numerous documentation requirements you must present when applying for a bank loan.
How to Choose an Asset to Offer as Collateral
Lenders that offer asset-based loans generally prefer to work with businesses that have gotten past start-up issues to the point of being at least a mid-sized business. Here are some other criteria asset-based lenders like to see:
- The applicant has one or more valuable pieces of business equipment to offer as collateral.
- Your business has posted solid financial statements over the past several months and years.
- You have an accounts receivable department and other companies owe your business enough money that you could use unpaid invoices as collateral if necessary.
- You have demonstrated excellent invoicing and collection strategies in the past.
Besides a simpler borrowing process with asset-based lending, you should receive the funds from your advance much faster as well.
How Do Business Owners Use Funds from Asset-Based Lending?
Sometimes a business just needs greater access to working capital, and other times the owner has a specific project in mind with the funds from an asset-based loan. Lenders typically don’t dictate how you must spend the funds. They only care that you make your monthly payments on time and present a valuable, high-quality asset to secure the loan.
Are you ready to learn more about this valuable business financing alternative? Please contact Kasher Capital today to learn more or request an application.