For countless businesses, asset-based lending has proven to be an excellent source of funding. In an asset-based loan, some asset owned by the business acts as collateral, reducing the risk for the lender. By reading this post, you’ll learn several reasons why this financing form is so popular.
Ease of Access
Because asset-based lending involves a business using some type of asset to secure financing, lenders are often more comfortable supplying funds. Businesses that run into roadblocks when seeking other funding sources may be more likely to find success through asset-based lending.
Along with being easier to obtain in general, loans secured by assets also tend to have faster application and approval timelines. That means that when time is of the essence — or when an entrepreneur simply doesn’t want a drawn-out process — asset-based loans can offer a relatively speedy solution.
Typically, loans based on assets have fewer covenants than those not based on assets. That translates to agreements that are easier for the borrower to adhere to.
Asset-based loans are often flexible in nature, allowing the business to use the funds as its leaders see fit. (There are some exceptions, though, in that some asset-based arrangements are tied to a specific purpose, like equipment loans.)
In many cases, asset-based lending is available to businesses earlier than other financing solutions are. However, by taking out an asset-based loan and then diligently adhering to its payment terms, a business can show its reliability and begin building a good credit history. That will go a long way toward unlocking other financing options in the future.
Lower Interest Rates
Asset-based lending agreements often come with lower interest rates than otherwise-equivalent counterparts. Lower interest rates translate to more money staying in the borrower’s bank account.
Whether you’re looking for a loan or another financial solution, Critical Capital Solutions would be glad to help. Reach out today.