When you are in your business through a full-year cycle, it might be going through various phases. Your seasonal sale trends might show fluctuations at times or your growth phases might not be that bright as you would have expected. These reasons lead to why your business undergoes cash flow shortages. If your company is having research backed-projections and if they are having regular business cycles, then it must be wiser for them to opt for asset-based lending. This lending is by now, one of the best solutions to rocket up your working capital effectively. But for that, we have detailed the entire basics of this lending for you to understand it efficiently.
The basics
These asset-based loans are short-term solutions or short loans that last for almost a year on average. But depending on the requirements and the business type, they could even last for six months to two years. These are often considered to be the revolving lines of credit that predominantly secures your tangible assets belonging to the business. The tangible assets that are acquired are only of very high market value. There can be various forms of these asset securities and they are:
- Inventory and raw materials
- Real estate
- Machinery and equipment
- Invoices and account receivables
The credit limit of your borrowing will be directly dependent on the collateral value that the lender has been able to procure. If in case you show up to be a defaulter, these collaterals can either be seized or be liquidated to gather the outstanding cash.
Why is this better?
You might find it very risky to leverage your company assets. But this is not the case because this lowers your risk potential and helps you to be eligible for the loan rather more quickly than others. The interest rates that factoring gives are also one of the best market rates. The lenders however back-check your payment history and your credit score before finalizing your loan. But as majorly the market value of your assets are gauged, your financial histories at times are also ignored.
This loan helps you provide flexibility of using the cash and repaying. There is immense scope in this loan as they do not consider any of your assets through this for collateral.
Accord asset-based lending can process your loan within a very short time by effectively evaluating your assets and providing you with the desired flexibility.