The pressure to obtain finances for growing a small business never seems to end. Small businesses are now forced to look for alternative financial sources after banks and other conventional financial sources turned a little cold in funding small businesses.
Small businesses can now use asset-based lending to get large loans from lenders, especially if they have low credit scores. What’s important is to consider whether asset-based finance offers the flexibility you are looking for with your financial arrangement.
Here’s what you should know about asset-based financing.
How does an Asset-Based Financing Process look like?
Since the inception of the asset-based lending method, the lending companies used to base the amount of money they loan out on the value of assets your company is worth. If your company’s asset is worth about $100,000, the company can comfortably loan you anything below $100,000. Your company’s assets will secure this amount.
The lending company will then look into other factors to determine the exact amount of loan to give you an advance loan. These factors will determine whether your company gets $50,000, $75,000, $90,000, etc., despite having the potential of receiving $100,000.
Mostly, asset-based lenders provide more or less cash depending on the liquidity of your company’s assets.
The lender will look at the distribution of the assets in your company. If most of your assets are in the accounts receivable, you get higher chances of receiving more money than another business whose assets are mainly on inventories.
The Benefits of using Asset-Based Financing
It encourages small businesses to invest in finances, knowing it can raise cash against them in the future.
You can use it for building a positive credit score for the benefit of securing other forms of financing in the future. This is especially important for businesses that are yet to get any credit records.
Qualifying for this kind of financing is always easier and faster than other conventional financing options.
When Are You Getting Your First Asset-Based Loan for Your Business?
Your business’s financial needs will always recur, and you will not always be able to finance them alone. Getting a reputable financier can help you scale the heights of business growth and remain relevant in your niche against competitors.
Get in touch with Spearing Capital and Consulting, Inc. for the best financing services for small businesses.