The Basics of Asset-Based Lending
Your working capital is the money that you use every day to cover expenses such as payroll and supplies. This funding is extremely important to your company’s operations, but sometimes the money you make does not fully replace the money you spend. If you have a working capital deficit and cannot keep up with your expenses, you should use loans to obtain the working capital you need to stay in business.
What Is Your Best Option?
There are many kinds of loans available, but asset-based lending is the best option for your situation. In this form of lending, the lender examines your assets and financial history and decides how much money to lend you and what your interest rate will be. Additionally, your assets serve as the collateral for the loan, which is why it is called an asset-based loan. Once you have the money, you can use it as working capital to fund any of your day-to-day operations.
What Can Serve as Collateral?
You may worry that you do not have anything valuable enough to serve as collateral. However, lenders consider equipment, accounts receivable, real estate, and almost any other kind of valuable property. Depending on how much money these assets are worth, the size of your loan and your interest fluctuate. To prepare yourself for the lender’s inspection, make sure that all your equipment is in good condition and that you address any maintenance issues in your building.
What Are the Benefits?
Most business owners are skeptical of taking out new loans, but asset-based lending gives you the funding you need to survive financial crises. No matter the size of your business, you can receive funding as long as you have enough assets and a good financial history. Unlike some loan programs, owning a small business does not automatically disqualify you from securing an asset-based loan. The application process is much shorter than for other loans, and lenders usually give their approval or denial quickly. This allows you to spend as much time as possible on the other parts of your job and gives you access to the working capital you need.
When you don’t have enough money to make ends meet at your company, you need to figure out a way to generate working capital. While your plans might include long-term methods of creating more capital, for now, turn to asset-based lending to cover your bills and keep your business running.