How to Leverage Inventory with Asset-Based Lending
There are going to come times when your business runs into financial difficulties. When this occurs, you want to make sure you have an idea of what financing options are available to you. Knowing where to turn when you need assistance with cash flow can make a huge difference with your success. Asset-based lending is a form of financing that a number of businesses can take advantage of. Your inventory is a serious asset and it can be used to help your business get into a better financial position in no time.
Understanding Your Options
This is a straightforward option to consider when you require financing. In order to qualify, you need to visit with a large lending institution like a bank or credit union. These are the organization that issue loans structured in this manner. The bank will require that you use your inventory as collateral in the transaction and offer you a loan based on the value of the asset. As with any other loan, you will be responsible for paying back what you owe along with whatever additional interest is determined by the bank.
In order for your business to qualify for asset-based lending, you need to hit a few key areas. The most important information the bank is going to ask of you is a balance sheet showcasing recent information about your company’s financial status. A lender wants to make sure your business is performing well before it releases a loan to you. A business that is failing might have an inventory that is not worth much. Providing a statement gives the lender the confidence needed to approve your application.
It is also likely that you will need to present data on your credit history. Most loans are only given out by banks to borrowers who have exceptional credit. If your business credit score is low, then consider making an attempt to improve it before taking out a loan.
You will have to pay interest on the loan you take out using an asset-based method. As opposed to other loans with high rates, you may be able to get a lower interest rate with this option. Since you are using inventory as collateral, banks may not need to charge you as much interest.
There are a number of reasons to consider asset-based lending for your business. This is a financing option that can help you secure the loan you need by using the inventory you already have.