Irrespective of the size of a business, the arrangement of capital is an imperative component of the overall business strategy. A business might seek funds for a variety of purposes such as the expansion of operational capacity, mergers & acquisition, assets purchase, ensuring sufficient working capital, etc. While there are various types of loans and financing options that businesses can access, asset-based loans are becoming increasingly popular. In fact, observing the finance industry, asset-based lending has turned into a trend among businesses ranging from start-ups to large enterprises.
Today, several businesses have prioritized asset-based lending due to its benefits that give it the upper hand over most financing options. Moreover, many experts acknowledge and support the practicality of asset-based loans. Matthew Ledvina is the director of a London-based company that specializes in asset-based lending. While working at the firm, he aided several startups and medium-scale businesses by providing them asset-based loans. Accordingly, he is familiar with all the benefits that the financing method has to offer to the businesses.
The biggest and the most sought after quality of asset-based loans are its lenient rules pertaining to the eligibility. Many firms that are either new to the business or even have not-so-good credit history can easily apply and qualify for the loan. On the contrary, the rules and regulations associated with the traditional business loans and lines of credit are stringent. Consequently, startups and struggling businesses find asset-based loans to be one of the best options for raising funds.
When it comes to collateral, the most common assets that companies use to get an asset-based loan include inventory, accounts receivable and equipment. Usually, such assets are not accepted as collateral in most traditional loans. Additionally, the amount of funds that a business can get from the loan depends on the value of the assets put as collateral.
Another major benefit of opting for asset-based loans is its rapid processing and fast approval. Its whole process is significantly faster as compared to a traditional business loan. Moreover, there is less paperwork and the list of formalities is also pretty short. Considering traditional business loans, they have lengthy procedures and have numerous stages including submission of detailed information of the business, assessment of the credit history, and calculation of maximum loan amount that the business is eligible for. Consequently, a business that requires immediate funds will go for the asset-based loan instead of a traditional loan.
It is quite obvious for a strong business that does not require immediate funds to declare the interest rates of asset-based loan as high. However, for companies that are in dire need of money and do not have good credit score find the asset-based loan a perfect option. In fact, most businesses claim the interest rates of asset-based loans to be completely reasonable and lesser than unsecured loans. As a matter of fact, the basic reason behind the satisfactory interest rates in asset-based loans is that the money of the lenders is secured with the collateral.
It is not long ago since the asset-based lending became a common way of financing businesses. However, the pace with which businesses are using it to generate funds for them, asset-based lending may become the dominant source of financing. Additionally, asset-based lending might also attract a higher number of investors in the near future.Read more on Matthew Ledvina’s blog, or follow his Facebook and Twitter profiles for updates.
