Getting to Know the Benefits of Asset-Based Lending
Asset-based loans have gained popularity over the past few years. They provide businesses with several benefits and work like a line of credit. While this is true, the qualification process for an asset-based loan is much easier. Keep reading to find out the top benefits of this type of loan.
One of the biggest benefits offered by asset-based financing is improved liquidity. When used properly, it offers predictable cash flow and financial stability. The benefit will help stabilize your business operations when they experience rapid growth, have seasonal revenues, or deal with limited cash flows.
Easy to Acquire
Compared to a traditional business line of credit, it is much easier to qualify for an asset-based loan. Your business just needs a minimal track record of reasonable financial controls and profitability. Besides that, it’s important to have assets you can leverage.
For most businesses, the easiest asset to leverage is accounts receivable. The invoices you have outstanding from credit-worthy clients serve as the perfect source of collateral because they are turned into cash easily. Usually, a company offering this financial product wants to finance invoices that will be paid within 70 days or less. You can also use equipment or inventory as collateral too.
Another benefit of asset-based financing is increased flexibility. There are few restrictions regarding how the money can be spent in most cases. It just needs to be spent on the business in some capacity.
The line of financing you receive is related to your accounts receivable (or another type of collateral you use). Your line will increase as your sales do and are usually fast and easy to have approved. There’s no need to go through the entire underwriting process again.
If your business meets the qualification criteria, it is possible to acquire an asset-based loan rather quickly. The underwriting process and application are faster than trying to qualify for a line of credit or conventional loan.
Asset-based loans are fewer catches than a conventional line of credit. Managing your line and remaining compliant is much easier.
Is Asset-Based Lending Right for Your Business
There’s no question that it isn’t right for all businesses when it comes to asset-based lending. However, it can provide some benefits for your business in many cases. Being informed is the best way to ensure that you get the desired results from the loan you take. Contact Valpzac Capital today to learn more about asset-based lending solutions for your business.