As the name suggests, asset based loans imply financing that relies on a business’s assets such as inventory and accounts receivable for collateral. Lenders advance loans based on an agreed percentage of a business’s assets, helping companies get immediate access to funds. Below, we discuss everything there is to know about asset based financing, from how to get it to its pros and cons.

Getting Asset Based Financing

Asset based funds are just like other loans, with lenders setting different conditions for cash advancement. Examples of these requirements are good reporting systems, good financial statements, customers with a good payment history, and a list of commonly sold goods. Detailed and accurate financial information puts your lenders at ease and guarantees them that you have a proper handle on your business.

Pros of Asset Based Financing

One of the benefits of asset based loans is that they provide a needed source of capital for companies that are highly leveraged, rapidly growing, undercapitalized and those experiencing a turnaround. The cash injection helps such businesses take advantage of growth cycles and get past a financial hump.

Asset based financing also comes in handy for businesses in the distribution and manufacturing sector and those in service companies that may be experiencing seasonal needs that interrupt their cash flow. In addition to this, they also go a long way in helping businesses finance acquisitions for their daily operations.

Cons of Asset Based Financing

For asset based financing to work, lenders tend to rely on customers with a good credit rating or those who pay in less than 60 days. This will occasionally exclude small businesses and individuals, further limiting your eligibility to receive the loans.

Asset based financing also tends to be more expensive than traditional loans since individual lenders often set the interest rates. In addition to this, you may be required to part with extra diligence fees and provide a personal guarantee to get a loan.

While the downside can seem like a hindrance, the benefits outweigh the additional requirements, helping you scale up your business needs with ease. If you need asset based loans to propel your business to success, BT84 Commercial Capital & Business Solutions is the partner you need. Call us today for help with your financing.