There is a wide range of financing options available for organizations. However, if you are looking for a financing solution that is easier to obtain than a traditional loan and will not require selling your assets, an asset-based loan may be a good financing option.
What Is an Asset-Based Loan?
An asset-based loan is a type of financing that uses the business’s own assets as collateral. This type of financing is effective when your organization has assets but needs working capital to continue operating normally. These assets, which are already in the organization, can help secure the financing you need to for working capital without selling assets. While there are many factors considered in this type of loan application, any organization with assets may be eligible for an asset-based loan. It is not limited to a particular industry.
How Asset-Based Loans Work
In asset-based loans, the amount the organization can borrow varies based on a number of factors. However, most loans can be up to approximately 75% of the value of the company’s account receivables. When inventory is used as collateral, the amount the company can borrow is usually approximately 50% of the inventory value. The APR for these loans can range from 7% to 17%. These loans are often attractive because they are easier to get compared to more traditional loans and they may have more flexible terms that work with your organization.
When you need working capital, a loan can be a good way to get it. By using your assets as collateral, you can gain access to an asset-based loan and take advantage of what your organization has without selling your assets. In this way, you can convert your assets into working capital so you can continue to achieve your organizational goals and grow your business to greater success.