How to Use Your Business Assets to Get the Funding You Need
All businesses need funding, and there are a range of options available for procuring this funding. Many small business owners turn to unsecured loans or lines of credit, but there is another choice. Asset-based lending can help increased your working capital and provide much needed cash flow for your business.
Here’s how to use your business’s assets to get the funding you need.
What Assets can I use?
Does your business have accounts receivable? What about real estate? These are two assets that could be used as collateral to secure a loan. While these are the two most popular assets to use, some other options include inventory, machinery or large equipment. The biggest determining factor when deciding which of your company’s assets would be best for helping you get a loan is how much funding your business needs.
Remember, the amount of the loan will not exceed the value of the assets put up as collateral. It won’t even be 100 percent of the value of the assets, so when deciding which assets to use, make sure you know their value first.
What Are the Benefits?
There are multiple benefits associated with asset-based loans. One of the major benefits is flexibility. Unsecured bank loans generally require a detailed appropriation plan, and any funds from the loan are only allowed to be used for the pre-approved purposes. Most asset-based lenders, on the other hand, do not delegate how the money is to be used. This leaves you free change plans if you need to, and to use the money exactly where you see fit.
Another major benefit is that asset-based lending tends to be easier to obtain. A business only needs a short track record of profitability to be considered for a loan. Finally, the underwriting process for asset-based loans is much quicker than the process for unsecured loans. This means the turn around from application to cash in hand is much quicker, making this option ideal for businesses who need financing sooner rather than later.
At one point or another, all small businesses need to find funding. There are a variety of financial tools available to help business owners meet this need. If your business has valuable accounts receivable, real estate or other large assets, you may want to consider asset-based lending. This method of funding is a fast and flexible way to boost cash flow and grow your business.