What is an Asset Based Loan?

  • October 29, 2020
  • Written by : REIL Capital

An asset based loan is exactly as it sounds: a loan based on company assets.

Simple enough, right? 

Although the definition may be simple, common questions arise in regards to this loan option such as what exactly are the company assets, why should you, as a business owner choose this type of loan, and how the process works.

We put together a quick must-know list of questions and answers before applying for an asset based loan.

How does the loan work?

Depending on the current financial state of your company, various options of assets may be accepted. For example, “if the company seeking the loan cannot show enough cash flow or cash assets to cover a loan, the lender may offer to approve the loan with its physical assets as collateral,” says Julia Kagan, personal finance editor at Investopedia.

What kind of assets are acceptable?

Assets generally accepted include accounts receivable, equipment, inventory, or real estate that are used as collateral. In doing this, you are providing a greater sense of security for your lender and therefore ensuring that the debt will be repaid. The stronger the trust, the more likely you are to receive flexible terms and lower rates. 

What are the benefits of using this kind of loan?

This type of loan is benificial for the business owner who instantaneously requires financing or support during tough economic times. Luckily, asset based loans are usually easy and quick to obtain with little documentation required to apply, assuming the business meets all requirements. This loan option also allows companies to quickly return to a normal financial state “due to the fact that they are given within a short period of time so as to increase the company’s cash flow,” as explained by Marco Carbajo, formal small business writer for The Balance.

Who might want this loan?

Asset based lending is most commonly used by companies in need of immediate capital to continue operating or support growth. With limited ways to do so, business owners become strategic in choosing the best option for their own company; for those that may not have excellent credit scores or a strong cash flow, this loan may be a great option for you.

Qualifications or limitations aside, others who see this loan as a viable choice including all businesses seeking funding to manage their ongoing cash flow. 

Where can you acquire this loan and how?

Fortunately for most, our asset based loans are not given based on your financial history or credit score. Instead they focus on the value of your business’ assets.

If you’ve searched for small business funding options, you know the endless process of comparing, choosing, and applying for loans. What you may not have experienced yet is the process of acquiring and repaying the loan…. Here at REIL Capital, we keep it simple and efficient. If you’re looking for cost-effective and quick access to funding with flexible terms and rates, we’re your team.

Meet us soon? 

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