Small business financing: An overview of asset-based lending

Every small business owner realizes the possible chances of ending up in an unexpected financial mess. When you need money quick and cannot wait for traditional lenders and banks, asset-based lending can come in handy. As the name suggests, asset-based lending is a form of secured loan, which allows small and medium-scale businesses to get quick access to financing, using their assets as a collateral. Services like Accord Financial asset based lending work with small companies, offering flexible financing when needed the most. Should you consider asset-based lending? When should you use this form of financing? In this post, we are sharing the basics worth knowing. 

Understanding asset-based lending

Once in a while, it is common for small and growing businesses to face a financial crunch. This could be related to refinancing or cash flow constraints. With asset-based lending, it is possible to get quick cash, to handle all kinds of situations. This form of financing is particularly useful for restricting the business, mergers, acquisitions, and investing in right opportunities at the right time. The good news is asset-based lending is absolutely flexible. While this is a secured loan, you can choose to pay it back as you want. 

What kind of assets can be considered?

For any secured loan, the collateral is like an assurance to the lender that the client will repay the money. Compared to some of the traditional forms of lending, asset-based lending is more flexible. Assets that can be considered include accounts receivables, inventory, machinery, real estate, and existing equipment. Typically, the lender will work with an appraiser to determine the value of assets being considered, and based on the value, you can borrow a percentage as the loan. 

What about the interest rate?

The interest rate for asset-based loans depends on several factor, including the collateral being used, the overall performance of your business in recent times, and the level of risk for the lender. However, you can expect to get genuine feedback from the lending service, and they will usually try to work things out to ensure that you get the loan in time. 

With asset-based lending, you don’t have to wait for long to get the finance, and while this may seem like an easy loan, we strongly advice caution, as the loan involves a collateral. If you do not manage to repay the loan in time and as per the terms & conditions, you may end up in a further financial mess.

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