Planning on getting asset-based funding sometime soon for your small business? Here are some things you need to know before you get one.
What is Asset-Based Funding?
Asset-based lending, also known as asset-based funding, is a type of financing in which a company borrows funds using its assets as collateral. These assets can include accounts receivable, property, inventory, and equipment. The funder will typically place a lien on the assets and may also require the borrower to maintain a certain level of insurance on the assets. This type of funding is often used by companies that have a lot of tangible assets but may need strong credit or cash flow.
6 Asset-Based Funding Benefits
Asset-based financing can offer a number of benefits for small businesses. Some of these benefits include:
Flexibility
Asset-based funding can be used for a variety of purposes, such as working capital, expansion, or acquisitions. This flexibility allows small businesses to use the funds in the way that best suits their needs.
Faster approval process
Another one of the most common asset-based funding benefits is the faster approval process. Because the funder is primarily concerned with the value of the assets being used as collateral, the approval process for asset-based funding can be faster than other types of financing.
No cash flow requirement
With asset-based funding, the funder is more focused on the assets of the business rather than the cash flow. This can be beneficial for small businesses that have a lot of assets but may not have strong cash flow.
Lower rates
Because the funder has collateral to fall back on in the form of the assets being used as collateral, the risk of default is lower. As a result, the rates for asset-based funding can be lower than those for unsecured financings, such as a traditional term loan or a line of credit, which do not have collateral to back them up. This can make asset-based funding a more cost-effective option for small businesses that have a lot of assets but may not have strong credit or cash flow.
Increased borrowing power
Small businesses can use their assets to borrow more money than they would be able to with unsecured financing. Because the assets of the business are being used as collateral, the funder is able to offer a larger funding amount to the small business.
This increased borrowing power can help small businesses with growth or expansion opportunities that they otherwise might not be able to afford. Additionally, some funders might offer a revolving line of credit, which allows small businesses to borrow and repay funds as needed. This can provide a source of working capital that the business can draw upon as needed.
Credit line
This type of funding can provide a revolving line of credit, which allows small businesses to borrow and repay funds as needed.
It is worth noting that asset-based funding may also come with more stringent terms and conditions than traditional forms of financing, and the funder may have more control over the assets used as collateral. It is important for small businesses to carefully consider the terms of asset-based lending before accepting it.
Get Asset-Based Lending with REIL Capital
REIL Capital makes applying for asset-based lending easy and convenient!
Whether you plan to apply for this type of funding or another financing service with REIL Capital, you’ll experience the REIL advantage of our top-notch customer support and service.
