How To Qualify for an Asset-Based Loan

When you need working capital, you have several options. Unfortunately, many traditional lenders use impossible-to-meet criteria, especially if you are a new business owner. For this reason, many companies are turning to asset-based lending for their funding needs. Before you start the application process, it’s important to decide if this type of lending is right for you and, if so, how to qualify.

Determining if You’re a Good Candidate

Before you spend time going through the loan application process, consider whether your company is a good candidate for this type of lending. Good candidates are past the initial start-up phase of the business, although they do not need to be a large corporation. For your business to be a good candidate, you must have marketable assets that include accounts receivable, equipment, or lien-free inventory. Your business must also have good invoice strategies and solid financial statements to be a good candidate.

How To Apply for the Lending

To apply for asset-based lending, you must first find a qualified provider. Seek out reputable lenders who are certified and have excellent reviews from previous borrowers. Before you begin the application process, gather 30-day net invoices, information about your equipment, real estate deeds, and anything else of value. Finally, ensure you fill everything out in detail, sign properly, and return the application with any necessary documents. This further ensures the approval process is as speedy as possible.

Using Your Funding

Once you receive approval for your financing needs, you can use the funds in a number of ways. Some companies use it as working capital for their everyday expenses, such as improving the company, paying employees, or taking care of outstanding vendor invoices. Others use it to invest in their business further by buying more assets, such as better equipment or new commercial property. Still, other uses include buying out other small businesses or repairing machinery.

Of course, the biggest reason people choose to go with asset-based lending is because of the other benefits. It is easier to qualify for this type of lending, especially if your company does not have an excellent credit history. The funding allows you to be more flexible in how you use it and has lower working capital ratios. Finally, your lender will be less involved in how you run your business using the money than it would be if you were to borrow from a traditional financial institution, such as a bank. Above all else, ensure you go with your gut feeling when choosing a lender who can meet your needs.

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