What Is Asset-Based Lending?


If your business is struggling and doesn’t have enough capital or working cash flow to get things going, then a short-term loan can make the difference, depending on your needs. 

Using loans to fund average business operational costs will help your business sustain operations, but you’ll also remain competitive in the industry. The loan can translate into more customers, improved revenue, and more profit. 

One such short-term loan includes asset-based lending in the form of hard money loans. 

Let’s dive into asset-based lending, what it is, how the process works, and who could benefit from this type of lending to help you find hard money lenders near me. 

What’s Asset-Based Lending?

Asset-based lending is a business loan secured by collateral. This collateral could be from inventory and accounts receivable to equipment, vehicles, and real estate. 

The lender will establish a credit limit based on the collateral value in a loan-to-value ratio (LTV). However, note that the value of these assets can change from day to day, so you must keep a close eye on their condition and market.

How does the Process of Asset-Based Lending Work?

A lender provides funds to a borrower based on the value of their assets. It may be a fixed amount or a revolving line of credit (like with a credit card). Funds can be used for purchasing equipment, expanding operations, and covering payroll and other expenses.

The best thing about this kind of lending is that you can get your business funded in days. There’s no waiting around for weeks or months to see if your small business loan has been approved.

Also, asset-based lenders are more willing to lend to businesses with poor credit scores, which may be unable to obtain traditional bank financing. These lenders consider the value of your assets, not just your credit score.

Since these loans are secured by specific collateral, the lender is less likely to lose money if your business fails. As a result, asset-based loans often have lower interest rates than unsecured debt such as a line of credit.

Who is Eligible for Asset-Based Lending?

Asset-based lending can be an attractive funding option for businesses that cannot access traditional bank loans, such as start-ups or companies experiencing rapid growth. It is also an option for companies with poor credit or insufficient cash flow but maintains a healthy balance sheet or own valuable assets.

To qualify for asset-based lending, companies must meet specific criteria. This can include having a strong balance sheet with sufficient debt capacity or owning enough assets to support the loan.

Want to Try Asset-Based Lending?

Asset-based lending is a type of short-term loan that allows you to borrow up to 80% of your accounts receivables and up to 50% of your inventory. While the intricacies might differ with the lender, it’s a good option if you have substantial assets and need a quick, flexible source of capital.

Consider leveraging asset-based lending and take your business a few notches higher.

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