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When cashflow alone isn’t enough for a business to qualify for a loan, a lender will look to the business assets to gain extra comfort and security. An Asset Based Loan can be structured as either a line of credit or a term loan, but the focal point will be the collateral that’s available to secure the loan.
The terms and conditions of an Asset Based Loan will also depend on the type of collateral that is available. Some of the collateral that a lender will consider for an Asset Based Loan is the following; accounts receivable, inventory, equipment, real estate, intellectual property, and marketable securities. It’s important to note that the most crucial collateral to a lender is going to be the accounts receivable and inventory. Other collateral, while in important, is not needed for an Asset Based Loan, but will be considered if there is a need for additional capital.
The application process to apply for an Asset Based Loan is paperwork intensive and requires a business owner to have all of his/her financial information organized. Outside of the standard documentation an Asset Based Loan is going to require a detailed asset list so a lender can understand the collateral that’s available to them.
SMB Compass's simple and secure online loan application can be completed in a matter of minutes. Quick & Easy!
After we process your application we will contact you and provide you with the best loan offer.
Once your loan is approved in 10 - 14 days. You will have capital deposited directly to your business bank account.
Asset Based Loans are generally best for business to business (b2b) industries. The reason this is the case is because B2B industries tend to have significantly more collateral then business to consumer (b2c) industries. For example, a manufacturer will have equipment, accounts receivables, and inventory/materials, while a restaurant will only have furniture, fixtures, and equipment.
Transportation & Trucking
There are a variety of reasons why a business would use an Asset Based Loan. Some of those reason include;
The 5 reasons above are just a few of the reasons why a business would use an Asset Based Loan. Overall, the purpose of an Asset Based Loan is to turn the assets on your balance sheet into cash to use in other areas of the business.
A real example of a company that used an Asset Based Loan was a plastics manufacturer based in Detroit, Michigan. New sales were resulting in the need to accelerate plans to purchase additional materials and higher labor faster than the initial forecast. With multiple partners in the business, it was hard to get everyone to agree to personal guarantee the loan, so we used the assets to replace the personal guarantee requirement. We were able to leverage the accounts receivable, inventory, and the plant machinery as collateral to provide a $1.2 million Asset Based Line of Credit. The company had an immediate injection of $1.2 million, which was previously tied up on the balance sheet. Think about the assets you might have on your balance sheet to turn to cash.
If you’ve been in business at least one year, have at least $100,000 in annual revenue, and have a personal credit score of at least 600, you are eligible.
We use a number of different data points to instantly provide you with the best possible loan offer, including competitive rates and payment terms that work for you and your business.