When you’re a small business owner, you quickly become an expert at making resources stretch as far as possible. However, even the savviest, most frugal entrepreneur is occasionally going to run into cash flow issues. When traditional bank loans aren’t a viable option, alternatives that let you leverage your existing business assets as collateral can be extremely helpful. Here’s a closer look at what they can bring to the table for you.
How Does an Asset-Based Loan Work?
Asset-based lending differs from traditional business-based lending in that the borrower doesn’t have to bring his personal assets on board at any time. Instead, you’ll be leveraging the valuable assets attached to your small business. Examples include (but aren’t necessarily limited to) commercial real estate, equipment, vehicles, or electronics. Some businesses may even be able to leverage the potential value of accounts receivable as collateral.
If approved, your funds are generally made available to you very quickly. Accessing your funds works very much like accessing any other line of credit as well, so you’ll enjoy a lot of flexibility as to how you can use them. This makes asset-based lending an ideal solution for covering emergencies, covering the initial costs of an expansion, or upgrading necessary equipment.
Is Asset-Based Lending Right for You?
When you run a small business, there are many possible reasons why a traditional bank loan might not be the best fit for you. If your business just opened its doors or is still in the process of getting off the ground, you may not yet have the proven track record for success that most banks will want to see. The same goes for your business credit rating. If you either don’t have one yet or have a reason to think there may be issues with yours, lending options that let you use your assets as collateral let you sidestep the need to build stellar credit first.
Asset-based loans are also particularly well-suited to small businesses in particular. Instead of having to wait several months to access your money, the right lender can see that you have it within days instead. You also have the ability to continue using it into the future, even as you’re making payments, in much the same way you could use a revolving line of credit. This makes it a great way to take care of day to day business costs, emergencies, and more. How would you use your funds to make your business better and more productive?