Skip to main content

All You Need To Know About Asset Based Lending Rates

By Ken
Get Asset Based Loans


Asset based lending rates are essential in taking out a loan because it will give borrowers an overview of the total amount to repay per month. When you say asset-based lending, it means that you are borrowing money with your assets as a collateral. So if you intend to expand your business and you need extra cash to undertake a small project, you can use your accounts receivables, machinery, inventory or any business asset as collateral. 

Asset-based loans have easier requirements than small business loans. All you have to do, to qualify for this loan, is to present a tangible collateral to reduce the risk involved in borrowing a large amount of money. Your asset will make up for the losses of the lending company in the event you failed to pay the money you owed. They recover from the loss by selling your asset. 

Asset-Based Lending: How It Works

There are two types of asset-based lending you need to familiarize yourself with:

● Business Lines of Credit: This type of asset-based lending lets you take on the credit line when you need it and pay the interest on the funds you have spent.  

● Business Term Loan: A term loan, on the other hand, requires you to repay the advance including the interest over the agreed repayment period. 

Though both of them may differ when it comes to payment terms, the amount of money they grant will be based on your secured assets' market value. Keep in mind that you cannot just deem any of your property as an asset. To qualify, your assets must be easily disposed in case of a default payment. Depending on the value of your asset, the lender will let you borrow anywhere between 75% to 85% of the assessed value. 

How Are Asset Based Lending Rates Calculated?

Asset based lending rates vary because you have to factor in the business qualification, financing products and lenders. The rates can be anywhere between 7% to 30%. Expect these rates to be higher than loans you take out from banks because asset-based lenders are considered alternative lenders. When compared to unsecured business loans, asset-loans are generally lower because of the tangible asset that mitigates the risk involved. 

How To Apply For Asset Based Lending 

The steps in applying for asset based loans are almost similar to traditional business loans, but the requirements you need to comply with differ. 

1. Evaluate your financial standing

While asset-based lenders are more interested in your business asset's value, it does not necessarily mean that you should allow your business financials to take a backseat. Whether or not some business documents are required, you need to prepare and review them. 

● Business Tax Returns

● Profit and Loss Statement

● Balance Sheet

● Sales Forecast, especially if you have just put up your business 

● Business Bank Statement

2. Identify Your Business Assets

Once your documents are ready, you have to know what your assets and their values are. You have to prove to lenders that you are capable of repaying the loan amount through your assets. These are the common business assets accepted by asset based lenders:

● Inventory List: Be sure that you have a list of inventory ready including its resale value and where the inventory is stored. Keep in mind that in the event of a default, your lender will use your inventory as a collateral by selling it. The resale value will be lower than its original retail value. 

● Accounts Receivables:Collect all accounts receivables aging statement. It should show past due invoices and outstanding invoices with due dates.  

● Equipment and Machinery List: Prepare a list of all the pieces of business machinery and equipment. Be as detailed as possible so the lender can clearly assess the value of each item. 

Once you have compiled this asset information, you can determine if they can be used as collateral for taking an asset-based loan. 

3. Make Sure Assets Are Not Used As Collateral For Other Loans

As part of assessing your application, you have to check if your assets are free and clear. This means that they are not used as collaterals on an existing loan. 

4. Complete Loan Application and Submit Documents

Supply the necessary information and submit the required documents. Some lenders may require you to have your business financials audited by another agency before they proceed with your application. You can clarify this with the lender before you continue with your application. 

5. Review Your Offer

Take the time to review the agreement before you sign any contract. Paying due diligence can save you from any future problems you may encounter. 

6. Conduct A Field Audit

An auditor will meet you in person to find out whether or not you have the capacity to pay. They will audit your assets including your accounts receivables and other physical assets. 

7. Wait For Approval

Once the lender is satisfied with the proof of asset you presented, they will approve your request for extra funding. 

Be sure to weigh your options and always take the asset based lending rates from different firms into consideration. Asset based loans are less risky because of the collateral you offer, but make sure to do your research. Not all lenders have reasonable offers so it is better to do your own homework before you commit to an asset based lender. 

Labels:

Comments

Post a Comment

Popular posts from this blog

4 Smart and effective ways to pay off debt on your own

By Admin
If you are overburdened with an overwhelmingly large amount of debt, you can now reduce your debt burden on your own. If you go to legal debt relief services, you can also get rid of debt but why would you pay for services, which you can do on your own? There are very simple steps involved in paying off your debt on your own. You just have to follow these steps to pay debt off . Read on to know the steps, taking which you could relieve yourself of the debt burden 1. Pay more than the minimum amount: It is a credit card rule that you need to make a minimum payment in order to stay current on your accounts. But if you have already accumulated a huge amount of debt burden, you should look beyond paying the minimum amount each month. Go and save money to pay more than the minimum amount. Though the banks or the financial institutions will want you to make the minimum payments only in order to drag on with the interest rates, but don’t fall a prey to such bank tactics. Make sure that you
Post a Comment
Read more

Things to Know About Tax Preparation Service

By Ken
In a few months’ time, the tax season would have already started and people would once again find themselves stressed out with filling out and preparing all documents needed in order to file their tax returns on time. It is in situations like these that the importance of a tax preparer becomes even more highlighted. Now, the question becomes, what does one need to ask in order to get the right person for the job?
Post a Comment
Read more

The differences between payday loans and cash advances

By Admin
Payday loans and cash advances are very similar at what they accomplish – they provide you with money during times which you need it the most. Even though they both achieve the same goals, there are still some key differences between them. While they are both methods for getting the money that you need, quickly, your personal situation may make one of them a better or more plausible option than the other. By knowing the differences between these two different solutions to your cash flow problems, you will be able to learn what you need about these types of loans and be able to use this information to decide which one is best for you and the situation you currently find yourself in.
Post a Comment
Read more

How to Calculate the Refunded Amount of PPI – Reclamation of Your Money

By Ken
PPI is the short form of Payment Protection Insurance. You can apply for PPI loans when you are running short of funds in your bank accounts and even the current assets are undervalued for your debt. The PPI is given along with the loan you take. However, you can reclaim your money any time, if you feel that the PPI claim was overvalued and you were sold without your knowledge. You can get back all the money you have paid for PPI.
Post a Comment
Read more

Assessing your monthly outgoings

By Admin
One of the New Year’s resolutions for businesses that often get thrown around is a suggestion to keep better records. As part of that, if you’re not already being very careful with your record keeping, you should keep better track of your monthly outgoings and properly balance it against your monthly income. The benefits of this should be immediately clear and if they are not, I would suggest going and asking someone why it’s important. Anyone will do. If you have small children, even they will probably know.
Post a Comment
Read more

Reasons to Use a Financial Management App

By Admin
If you like to keep track of personal budgets, or if you just ask yourself at the end of the month where did all the money go, it is time to go from a piece of paper and a pen to your financial management app. As smartphones are everywhere now, there is no reason for you to refuse to use an app that would bring so many benefits to you and your finances. You save Money It has been proven that people who keep track of their income and expenses, and people who plan their budgets manage to save more money than others do. Financial management apps allow you follow your incomes and your costs, analyze them and see where you can cut and where you can add. Seeing the exact numbers will motivate you to want to save money, and will help you decide on whether to take a loan.
Post a Comment
Read more