Small business 101: Here’s why asset-based financing may help
Dealing with a decline in cash flow is not easy for small businesses and startups. Operations and smooth functioning of the enterprise can get compromised, if there is not enough financial freedom to take necessary decisions. An advance or loan in such situations can be really handy. For a lot of small companies, traditional loans may not be an option, unless they have stellar credit. That’s exactly where asset-based lending comes in the picture. Options like prêt sur actifs Accord Financial allow companies to get the money they need, by using assets they already own. In this post, we are talking about the relevance of asset-based lending.
Identifying the collateral
It’s obvious that asset-based lending requires a collateral, which means that some of the assets will be used to procure the money. However, this doesn’t mean that any asset can be considered for this form of financing. Lenders are interested in loans that have a lower depreciation rate and can be converted into cash more easily. The best collateral assets for such loans include approved/valid account receivables, equipment, inventory, and in select cases, real estate. The biggest advantage of asset-based financing is quick access to cash, and you can expect approval and further proceedings to be done in a matter of one week, depending on the service selected.
What are the pros and cons?
For small businesses, getting money on time and when required is crucial for functioning. Entrepreneurs often want to be assured that the application for loan will be approved, and that may not always hold true with traditional lenders. The best benefit of asset-based financing is the ability to liquidate existing assets. Even if a company doesn’t have the best credit rating, they can still consider using assets they own to get a loan.
On the flip side, with any kind of secured loan, there is a risk of losing the asset used as collateral, and therefore, it is absolutely necessary to keep an eye on relevant terms and conditions. If your company is considering asset-based financing, we recommend that you work with the right lending & financial service that offers sane advice and flexible repayment terms.
When you have assets that can be used to procure a loan, there is no need to wait for getting an advance. What needs attention is the interest rate and plan on how the asset-based loan will be eventually paid.