For small businesses, constant access to resources is critical to remain operational. Once in a while, it’s necessary to induce an influx of funds, for which there are varied choices. One of the common and popular options is asset-based lending. Also called asset-backed finance, this is a secured loan, which is ideal for both small and medium-sized businesses that need fast, assured, and flexible financing. Companies like Accord Financial work with businesses in a fair, transparent manner, offering asset-based loans.
When to consider asset-based loans?
Small businesses can consider asset-based loans for a wide range of needs. This could be something as basic as refinancing, or to fund expansion plans or restructuring. Asset-based loans are also handy for cases related to acquisitions and mergers. True to the name, asset-based loans are backed by collateral. Assets are often the best source for small businesses, especially when they are in need of big amounts. With this form of financing, it is possible to get loans of up to $20 million.
How much can be borrowed?
As mentioned, asset-based loans can offer amounts up to $20 million, but facts vary with each case. The amount that a company can borrow is typically a percentage of their combined value of inventory, equipment, and account receivables. In some cases, real estate value can be considered. In other words, when a small business needs to get money for working capital needs, they can access funds easily and quickly with this form of lending. As the company grows, the lending amount will also increase. Up to 90% of accounts receivables, real estate, inventory and equipment can be considered for asset-based loans.
Things to know
The biggest advantage of asset-based lending is the ability to transform assets to get an immediate advance and financial help. This can be really handy for companies that are looking forward to major restructuring, and such form of lending is not limited by financial ratios. The interest rate for asset-based loans varies and is dependent on many factors, depending on the collateral being used, the risk involved for the lender, and overall performance of a company. On the flip side, asset-based lending has similar concerns as with any secured loan, and financial performance of a small business can actually impact how much they can borrow.
Final word
If used for the right reasons and with a good financial service provider, asset-based loans can be extremely handy for small businesses. Be sure to check out all terms & conditions before taking the call.
