As any business owner knows, loans are often necessary at various times. Not only are they needed to get a business started, but also at various times along the way to get new equipment, pay for an expansion, update technology, or many other things that go into making a successful business. However, while most businesses have always relied on traditional lenders for their loans, many are now turning to what is known as asset-based loans to get the financing needed for certain projects. Offering a number of advantages that many business experts compare to a standard line of credit, these loans are rapidly gaining in popularity. If you are a business owner and find yourself in need of financing, here are seven smart things you should know about asset-based loans.
Easier Qualification Requirements
When a business owner approaches a traditional bank to ask for a loan, there are often many obstacles in their way. Along with a bank wanting the business to already possess a long track record of success, they also make the loan process a long and arduous process, which can be frustrating and delay purchases of much-needed equipment. However, asset-based loans offer much easier qualification requirements. In most cases, only a short track record of success and possession of enough assets, such as equipment or inventory, are sufficient to obtain these loans. More details can be found cá cược miễn phí 2019here.
By using asset-based loans, your business can gain greater liquidity. In doing so, this can result in a much more stable and predictable cash flow, which can help stabilize a growing business, especially one that may rely strongly on seasonal revenues. Additional information about this aspect of asset-based loans can be found here.
While traditional loans can be hard to obtain and have very strict requirements attached to them, asset-based loans are much more flexible for business owners. If you obtain an asset-based loan, you can generally spend the money any way you see fit, so long as it can be justified as being spent for business purposes.
Easier to Obtain Increases
Because these loans are similar in nature to a line of credit, it is possible to obtain increases in asset-based loans just as you would with a line of credit. Since the financing of these loans is linked directly to the value of your company’s accounts receivable, increases can be given to you as your company’s sales and revenue increase. And since it will not be necessary to go through the underwriting process each time, increases can be approved very quickly, usually in a matter of days.
Quicker Approval Process
If you go to a traditional bank seeking business financing, the process can sometimes take several months for completion. However, when seeking an asset-based loan, the loan underwriting process can usually be completed in no more than two weeks. Therefore, if you are in need of new equipment or technology, you won’t have to delay making these purchases, allowing you to provide greater service to your customers.
Building a Positive Loan History
Rather than try to use a traditional bank and agree to loan terms that may result in late payments or default, an asset-based loan can be much easier to obtain and pay off, allowing you to build a positive loan history for your business. By doing so, it will then become easier and easier to obtain financing for future projects and to also receive higher and higher amounts if needed.
Fewer Covenants and Lower Costs
With a traditional loan or line of credit, there are often many types of covenants and costs associated with these financing options. As a result, it can be especially hard for new or smaller businesses to obtain the financing they need. However, if you pursue asset-based loans, they almost always have far fewer covenants and costs, making them much more attractive options for growing businesses. Because of this, it is also easier to stay in compliance with the loan terms and to also use the money saved on covenants and fees for other business projects.
By choosing to use asset-based loans, chances are your business will be able to grow much faster than anticipated.