What is asset-based borrowing?

A lender's willingness to lend money to a borrower for an asset-based loan depends on the value and collateral that the asset is. These loans are approved less on the borrower's credit score than the asset's value. Lenders have the right to repossess the collateral if the borrower defaults on an asset-based loan.

co-founder and president said that "asset-based loans can be a great way to obtain business financing using company assets as collateral." The loans are typically secured by equipment, real property, accounts receivables, or inventory.

 

What is asset-based lending?

Asset-based lending is based on the asset or group of assets used as collateral. This could include equipment, inventory, or unpaid invoices.

 

Khanna explained to Business News Daily that once an asset has been pledged as collateral, the lender will offer the borrower an amount equal to the asset's actual value.

 

He said that lenders prefer larger loans to avoid the high cost of monitoring an asset-based loan.

Asset-based lending has many benefits.

Asset-based loans have the clearest advantage of being easy to get, even if your personal or business credit is not great. Lenders can rely on collateral to repay the loan even if you default.

 

Asset-based loans are more likely to be approved and funded faster than traditional term loans from banks or credit unions.

 

Stewart stated that asset-based loans are faster to get capital than other types of lending, especially when you need them for sudden expansions or increased production.

 

It is usually easier to secure an asset-based loan than bank loans. This requires good credit, significant financial history, healthy debt/income ratio, and more.

 

Khanna stated that it should be easy to secure a [asset-based] loan if your company has good financial statements, inventory, products with an existing market, and a history of paying bills on time.

Asset-based loans are suitable for businesses that need fast funding and those that cannot access conventional loans.

 

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