Funding your business operations can be hard with an unstable cash flow. For this reason, finding ways to complement your efforts is important. The availability of asset-based financing as an option should prove helpful. Learning more about this financing option is therefore crucial before you decide. This guide explains more.
How Asset-Based Financing Works
In most cases, borrowing funds from banks and other conventional financial facilities or alternative lenders will dictate that you have collateral. With asset-based financing, you use specific assets in your business as collateral, and a means to secure the needed funds for your operations. The lender dictates what you can use as collateral for the loan borrowed. Revolving lines of credit, receivables, machinery, and other assets in your premises can serve as collateral.
Reasons to Consider Asset-Based Financing
While the lender can determine what you can use as collateral, you enjoy flexibility as a borrower. With asset-based financing, you can present several assets in your business premises and find it easy to convince the lender. Also, your assets can determine the amount to borrow for business operations.
Improves Cash Flow
Compared to other financing options, improving cash flow is easier with asset-based lending. Getting out of financial hurdles is much easier when you can use your assets to secure funds. With this financing option, you complement your cash flow and handle business operations effortlessly.
Credit history and your business financial capabilities are among the things lenders look at before approving your loans. The application process can also be longer than expected in most cases. The chances of loan approval are also lower. The case is, however, different from asset-based financing. With the right asset, convincing the lender and getting approval is easy.
It is Cheaper
Borrowing funds for business operations without collateral subjects you to higher interest rates. The repayment terms are also strict, making it hard to meet your financial expectations. It is cheaper with asset-based lending as the collateral covers the interest rates. You also have the chance to repossess the asset after repayment, helping you avoid losses.
With asset-based financing, it is possible to meet your business’s financial obligations and maintain proper business operations. It is easier to achieve positive results after proper guidance. Let the financial experts at Monterey Commercial Capital offer guidance. Contact us through calls or email today.