Some business owners have avoided the possibility of asset-based lending simply because they don’t want to risk losing those assets in the event of a default situation. Other company managers or owners are fearful of asset-based lending because they have fallen prey to misconceptions about how this type of financing works. Here are three common misconceptions about asset-based lending which you should completely disregard when you’re thinking about acquiring funding.
Asset-Based Loans Are Expensive
The truth is that asset-based loans are just as affordable as traditional loans are, and you’ll see that if you place the two side-by-side and compare them. For example, if you were to use your Accounts Receivable to secure an asset-based loan, you would pay a one-time fee for the service. However, if you were to take out a traditional loan, you’d be paying a recurring interest fee every single month until the loan was paid off.
Asset-Based Loans Are Not Flexible
In many cases, traditional lenders will require you to use any cash you borrow for business purposes, and if you fail to do that you could be subject to severe penalties, or you might even have to pay back the money. Asset-based lenders tend to be much more flexible, with no requirements on how you use the funds being borrowed. You will actually have far more flexibility with an asset-based loan than you would with almost any other kind of financing.
Asset-Based Loans Are Hard to Get
This is far from the truth, and in fact just the opposite is closer to the truth. Unsecured loans are much harder to qualify for than asset-based loans are. Many lenders are much more willing to extend loans when there are hard assets securing the loan, because there is much less risk to them. If you do some simple research, you are very likely to find that getting an asset-based loan is easier than qualifying for most other types of financing.
Will Asset-Based Lending Work for Your Business?
If your business needs capital, one good way to acquire it could be through asset-based lending. Contact us at Adventure Capital Group so our financial experts can consider some possibilities with you in this area.