Entrepreneurs sometimes require outside funding in order to grow their businesses. One financing option to consider is asset-based lending. This involves using equipment, machinery, inventory, accounts receivables, or other business assets as collateral in order to obtain a loan. Advantages of this form of funding include quick approval times compared to traditional loans, the lack of high credit score requirements, and the ability to continue to use your assets while they serve as collateral. Here are some tips on using business assets as collateral for loans.
Balance the Benefits and Risks
Approval for asset-based loans does not depend on the length of time you have been in business or on your credit rating but rather on the value of your assets. Even new companies or companies with low credit scores can obtain funding by using their assets as collateral. However, it is important to keep in mind that if you are unable to make your loan payments, you will lose the assets you have risked. For this reason, you should try to use assets as collateral that are not indispensable to the running of your business.
Find Out Which Assets Are Acceptable
Lending institutions accept only certain types of assets as collateral. Before you finalize a loan, find out which of your assets are acceptable to your lender. You can only go ahead with the loan if you and your lender can agree on the collateral.
Assess the True Value of Assets
Before you finalize the details of a loan, have a valuation made of the assets you are considering using as collateral. This will enable you to find out what your assets are really worth and will preclude the possibility of the lender refusing you a larger loan by assigning a value to your property that is too low.
For more information on using business assets as collateral for loans, get in touch with Prosper Lending Firm.