Benefits of Asset Based Lending

Benefits of Asset Based Lending

Whether for personal or professional purposes, the need to borrow money arises frequently throughout life. Major financial undertakings like buying a house, or starting a business require funds that cannot typically be paid out-of-pocket. Therefore they must be borrowed from a financial institution, investment group, or other sources.

While many types of loans are fairly well-understood — including commercial term loans, home equity loans, and others. Other types of financing can be effective in both a personal and professional capacity. One of these is asset-based lending. An asset-based loan is lent based on the given value of an item. Perhaps a piece of property, equipment, business inventory, a vehicle, or something else — that is put up as collateral. For both business and home purposes, an asset-based loan may be worth considering, for the following reasons.

Fast To Secure

A major benefit of asset-based lending is that loans are frequently fairly rapid to secure. So long as the given asset being used as collateral is properly appraised, your bank, financial institution, or other lenders can get you the funds in question fairly quickly. This is because your lender feels secure that if you default, they will have adequate recourse to claim an item of equivalent value.

Less Restrictive About Use

In a similar spirit, asset-based loans are often less restrictive about use than other loans. In other words, once you have access to the funds, you may have substantial leeway in how they are used.

Generally speaking, this is for the same reason that they are quick to secure. By knowing that they have access to a valuable piece of collateral, your lender may be less concerned about your use of the funds. If you fall behind on payments, though, you may end up defaulting and losing whatever you have put up as collateral.

Use With Other Loans

While an asset-based loan is frequently unlikely to cover the entirety of your cash needs. For instance, if opening a business they can be useful in smaller instances, or when used in conjunction with other types of loans. For instance, if a more substantial business term loan is insufficient for your needs, an asset-based loan down the line can help fill in the gaps.

In short, there are several ways an asset-based loan can be effective in your fiscal plans. Considering the options above and others may help you determine if this type of loan is right for you.