Using Asset-Based Lending to Pivot Away From Traditional Loans
For business owners looking to move away from traditional loans, asset-based lending can be an effective and efficient alternative. Asset-based lending is a form of secured financing in which the borrower pledges assets as collateral for the loan. This type of lending has become increasingly popular among small businesses due to its more flexible requirements and lower interest rates than those associated with traditional loans.
How Asset-Based Lending Works
Asset-based lending is a great option for businesses that don’t meet the stringent requirements of traditional lenders. Banks and other financial institutions typically require a lengthy application process, detailed financial statements, and sometimes even personal guarantees from owners or shareholders to approve loans. Asset-based financing eliminates these time-consuming steps by using assets such as inventory, accounts receivable, and other business assets as collateral. This type of lending is also a great option for businesses that don’t have strong credit scores or long operating histories, as lenders will still accept the collateralized assets as security.
Low Interest Rates
In addition to being a more flexible option than traditional loan financing, asset-based lending also offers businesses lower interest rates than those associated with unsecured financing. This is because the lender can recoup their costs if the borrower fails to make payments and can repossess the collateral. As a result, lenders are more willing to offer favorable rates for asset-based loans, making them an attractive option for businesses looking to save money in the long run.
Better Cash Flow Management
Finally, asset-based lending can also provide businesses with a more predictable cash flow due to its revolving nature. This means that borrowers can draw funds from their loan up to an agreed-upon limit and then repay them as their business generates income. This provides companies with a reliable source of funding they can count on for future projects or expenses, without having to take on additional debt.
Asset-based lending is a great option for businesses that need quick access to funds but may not qualify for traditional loans. With its more flexible requirements and lower interest rates, it can provide companies with the capital they need while still allowing them to save money in the long run. If you need asset-based lending solutions for your business, reach out to the team at Leading Edge Commercial Capital today.