The Facts About Asset-Based Lending
To keep your business successful, it is important you know where to turn when you need financing assistance. Cash flow troubles can come about for a number of reasons. When you do not have the access to capital that your company requires to stay functional, understanding which solutions are available to you can be crucial. Asset-based lending has been a popular choice among business owners for many years. To understand whether or not this is a good fit for you, take a moment to look over these facts about the service and what it entails.
How It Works
There are a number of different ways to go about this financing solution. One of the more popular options is using unpaid invoices as an asset for a service called factoring. A company that specializes in factoring will assess your invoices and purchase the ones that qualify from you. The factoring specialists will collect the full amount from your client and will provide you with the rest of what you are owed when this has been accomplished. You receive the money you are owed as an advance and can use it to keep your business running as usual.
While factoring is one way to go about using asset-based lending, there are other methods to consider. Using assets like invoices and other high-value items to open a line of credit can be a fantastic short-term solution. You never know when a financial problem will arise. By having a line of credit available to you, there is always a simple answer to your short-term capital troubles. Use the line of credit to cover your expenses, pay back what you owe, then continue to use the credit line to cover whatever future demands are placed on your business.
This form of lending is a very simple one to understand. As long as your assets qualify, you will have no trouble obtaining the financing you require. Of course, there are a few considerations to take. If you want to factor your invoices, you need to make sure the ones you have will qualify. Lenders need to be positive that your clients are financially responsible and will assess your invoices based on the reputation of the client. Often, invoices from well-known corporations and government offices are the most likely to qualify for factoring services.
Getting started with asset-based lending is all about determining whether or not the service can help you through a difficult financial period. Assess your invoices, contact a company that specializes in the service, and see how you can use your assets to the advantage of your business.